UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the Fiscal Year ended December 31, 2000
OR
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _____ to _____
Commission File No. 0-24004

HOLLINGER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

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|Delaware                                                       |  | 95-3518892                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
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|401 North Wabash Avenue, Suite 740, Chicago, Illinois          |  | 60611                                  
|(Address of Principal Executive Office)                        |  | (Zip Code)                             

Registrants telephone number, including area code (312) 321-2299

Securities registered pursuant to
Section 12(b) of the Act:

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|Title of each class:                          |  | Name of each exchange on which registered:
|Class A Common Stock par value $.01 per share |  | New York Stock Exchange                    | 
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|9 1/4% Senior Subordinated Notes due 2006     |  | New York Stock Exchange                    | 
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|8 5/8% Senior Notes due 2005                  |  | New York Stock Exchange                    | 
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|9 1/4% Senior Subordinated Notes due 2007     |  | New York Stock Exchange                    | 

Securities registered pursuant to
Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes x  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [   ]

The aggregate market value of Class A Common Stock held by non-affiliates
as of March 21, 2001, was approximately $950,937,000. As of such date,
non-affiliates held no shares of Class B Common Stock. There is no active
market for the Class B Common Stock.

The number of outstanding shares of each class of the registrants common
stock as of March 21, 2001 was as follows: 84,285,671 shares of Class A Common
Stock and 14,990,000 shares of Class B Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

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|Document                                                                                                                           |  | Location
|Proxy Statement for 2001 Annual Meeting of
Stockholders filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 |  | Part III



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HOLLINGER INTERNATIONAL INC.

2000 FORM 10-K



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|         |  | PART I                                                                               
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|Item 1.  |  | Business                                                                              |  |      | 1  | 
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|Item 2.  |  | Properties                                                                            |  |      | 13 | 
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|Item 3.  |  | Legal Proceedings                                                                     |  |      | 14 | 
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|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |      | 14 | 
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|         |  | PART II                                                                              
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|Item 5.  |  | Market for the Registrants Common Equity and Related
Stockholder Matters             |  |      | 17 | 
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|Item 6.  |  | Selected Financial Data                                                               |  |      | 18 | 
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|Item 7.  |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |      | 20 | 
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|Item 7A  |  | Quantitative and Qualitative Disclosure about Market Risk                             |  |      | 35 | 
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|Item 8.  |  | Financial Statements and Supplementary Data                                           |  |      | 37 | 
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|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure  |  |      | 37 | 
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|         |  | PART III                                                                             
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|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  |      | 38 | 
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|Item 11. |  | Executive Compensation                                                                |  |      | 38 | 
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|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  |      | 38 | 
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|Item 13. |  | Certain Relationships and Related Transactions                                        |  |      | 38 | 
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|         |  | PART IV                                                                              
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|Item 14. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  |      | 39 | 



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PART I

Item 1. Business

Overview

Hollinger International Inc. (the Company), through subsidiaries and
affiliated companies, is a global publisher with English-language newspapers in
the United States, the United Kingdom, Canada and Israel. Its assets include
The Daily Telegraph,the Chicago Sun-Times, The Jerusalem Post,a large number
of community newspapers in the Chicago area, and a portfolio of new media
investments. The Companys Canadian newspapers are primarily in Ontario and
British Columbia and are owned through Hollinger Canadian Newspapers, Limited
Partnership (Hollinger L.P.), in which the Company has approximately an 87%
interest. In addition, the Company also has a 50% interest in The
National Post Company (National Post)
and a 15.6% equity interest in CanWest Global Communications Corp.
(CanWest),
an international media company, with substantial interests in conventional
television, specialty cable channels, radio networks and newspapers.

During 2000 the Company sold virtually all of its United States Community
Group newspapers, with only one Community Group newspaper and The Jerusalem
Postremaining at December 31, 2000. In addition, the Companys Canadian
operations were significantly reduced on completion of the sale to CanWest of a
significant number of Canadian newspapers and Internet properties for total
sale proceeds of $1.8 billion including both cash and CanWest equity shares.

The operations of the Company for the year ended December 31, 2000
consisted of the Chicago Group, Community Group, U.K. Newspaper Group, and
Canadian Newspaper Group, which accounted for 19%, 3%, 27% and 51%,
respectively, of the Companys total operating revenues of $2,096.0 million.

Unless the context requires otherwise, all references herein to the
Company mean Hollinger International Inc., its predecessors and combined
subsidiaries, Publishing refers to Hollinger International Publishing Inc.
and Hollinger Inc. refers to Hollinger Inc.

Chicago Group

The
Companys Chicago Group consists of more than 100 titles in the greater Chicago
metropolitan area including the Chicago Sun-Times, the fourth largest
metropolitan daily newspaper in the United States in
terms of daily readership, the Post Tribune
in northwest Indiana and the Daily Southtown. The Chicago Sun-Timesis
published in a tabloid format and has become Chicagos best read newspaper,
attracting 1.7 million readers every day. The suburban papers include Pioneer
Newspapers Inc. (Pioneer Press), which currently publishes 55 weekly
newspapers in Chicagos north and northwest suburbs, Midwest Suburban
Publishing Inc. (Midwest Suburban Publishing) which currently publishes the
Daily Southtown,11 weekly newspapers, 23 biweekly newspapers and five free
distribution papers, primarily in Chicagos south and southwest suburbs and the
recently acquired Copley Chicago Suburban newspapers which publishes The Herald
News, The Beacon News, The Courier Newsand The News Sun, among others.

Community Group

During 2000,
the Company sold virtually all of its remaining United States
community newspapers for proceeds of approximately $215.0 million. Only one
United States community newspaper was still owned at December 31, 2000. For
accounting and management purposes, the Community Group also includes the
Companys wholly-owned subsidiary (Jerusalem Post) which publishes The
Jerusalem Post, Israels most important English-language daily newspaper, with
a paid daily circulation of approximately 13,300. The related weekend edition
of The Jerusalem Post, including the English and French-language international
weekly editions, have a combined paid circulation of approximately
70,000.



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U.K. Newspaper Group

The Companys U.K. Newspaper Group (The
Telegraph) consists of its wholly owned
subsidiary, The Telegraph Group Limited and its consolidated subsidiaries . The Telegraph publishes The Daily Telegraph, which was launched
in 1855. The Telegraph also publishes The Sunday Telegraph, The Weekly
Telegraph, telegraph.co.uk,and The Spectatormagazine. The Daily Telegraphis
the largest circulation quality daily newspaper in the United Kingdom with an
average daily circulation of approximately 1,025,000, representing a 35% share
of the quality daily newspaper market, a substantially greater share than that
of its nearest direct competitor. The Daily TelegraphsSaturday edition has
the highest average daily circulation (approximately 1,222,000) among quality
daily newspapers in the United Kingdom. The Sunday Telegraphis the second
largest circulation quality Sunday newspaper in the United Kingdom with an
average Sunday circulation of approximately 810,000.

Canadian Newspaper Group

At December 31, 2000 the Companys Canadian Newspaper Group primarily
consisted of the operations of XSTM Holdings (2000) Inc. (formerly Southam
Inc.) (Southam), an 87.0% interest in Hollinger L.P. and a 50%
interest in National Post.

On November 16, 2000, the Company and its affiliates, Southam and
Hollinger L.P. (Hollinger Group) completed the sale of Canadian newspapers and
related assets to CanWest for total sale proceeds, at fair value, of
approximately $1.8 billion. Included in the sale was a 50% interest in National
Post, all the metropolitan newspapers, including the Ottawa Citizen, The
Gazette(Montreal), the Calgary Herald, the Edmonton Journal, The Vancouver Sun
and The Province(Vancouver), a large number of community newspapers and
operating Canadian Internet properties, including canada.com.

At
December 31, 2000 Southam and Hollinger L.P. had 32 daily newspaper
properties remaining, including National Post, and the Southam Magazine and Information Group which
publishes Canadian business magazines and tabloids for the automotive,
trucking, construction, natural resources, manufacturing and other industries.
In 2000, the National Posthad an average six-day readership of 1.72 million
with average daily paid circulation of over 330,000.

Bank Credit Facility

Using the cash proceeds from the CanWest transaction described above, $972
million of borrowings under the Restated Credit Facility were repaid and the
Restated Credit Facility was reduced to $5 million. Subsequent to December 31,
2000, the Company entered into a new credit facility in the amount of $120
million of which $58 million had been drawn by March 21, 2001. This facility
matures September 30, 2001.

HCPH Special Shares

On June 12, 2000, the Company exercised its option to pay cash on the
mandatory conversion of HCPH Special shares. Each Special share was exchanged
for $8.88 cash resulting in a payment in July to HCPH Special shareholders of
$58.2 million. This payment was $10.9 million in excess of the recorded book
amount. This excess amount was presented as minority interest in the Statement
of Operations.

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Ownership by Hollinger Inc.

At December 31, 2000, Hollinger Inc. directly and indirectly owned 37.0%
of the combined equity interest and 73.3% of the combined voting power of the
outstanding Class A Common Stock and Class B Common Stock of the Company
(without giving effect to the future issuance of Class A Common Stock upon
conversion of the Companys Series C Preferred Stock or remaining Series E
Preferred Stock). As a result, Hollinger Inc. will continue to be able to
control the outcome of any election of directors and to direct management
policy, strategic direction and financial decisions of the Company and its
subsidiaries. Hollinger Inc. owns all of the outstanding Series C Preferred
Stock which shall convert into Class A Common Stock of the Company
automatically on June 1, 2001 pursuant to the conversion formula set forth in
its Certificate of Designations and Series E Preferred Stock of the Company,
which is convertible at any time into shares of Class A Common Stock based on
the conversion formula set forth in its Certificate of Designations.

Hollinger Inc. is effectively controlled by The Hon. Conrad M. Black,
Chairman of the Board and Chief Executive Officer of Hollinger Inc. and of the
Company, through his direct and indirect ownership and control of Hollinger
Inc.s securities. Mr. Black has advised the Company that Hollinger Inc. does
not presently intend to reduce its voting power in the Companys outstanding
Common Stock to less than 50%. Furthermore, Mr. Black has advised the Company
that he does not presently intend to reduce his voting control over Hollinger
Inc. such that a third party would be able to exercise effective control over
it.

General

The Company was incorporated in the State of Delaware on December 28, 1990
and its wholly owned subsidiary Hollinger International Publishing Inc.
(Publishing) was incorporated in the State of Delaware on December 12, 1995.
Each of the Company and Publishing has its executive offices at 401 North
Wabash Avenue, Chicago, Illinois 60611, telephone number (312) 321-2299.

Business Strategy

The Companys strategy for achieving growth in its newspaper business is
based on achieving improvements in the cash flow and profitability of its
newspapers principally through cost reductions and revenue
enhancements. The
approach of both the Company and Hollinger Inc. to improving profitability
typically includes measures to reduce costs, improve efficiency and enhance
product quality, including the visual quality of printed pages.

In Chicago, with the recent acquisition of the Copley Chicago Suburban
newspapers, significant emphasis will be placed on building revenues
by taking advantage of the extensive network of combined Chicago Group publications. The
Chicago Group also will continue its focus on cost reduction. The opportunities to
achieve cost savings through joint distribution and sales programs are very
encouraging. The full conversion to the new Chicago Sun-Timesstate of the art
printing facility is near completion. This facility will enable the group to
reduce the cost of producing its publications and enhance the quality of the
printed product. The group continues to put a strong emphasis on online
products and has developed partnerships with other media organizations,
including TV and radio, that will strengthen both the newspaper and web
products.

The focus for The Daily Telegraphwill continue to be to retain its
circulation dominance in its market and to increase the resulting advertising
revenue. The successful prepaid subscription program will continue
and the company will focus on maintaining
and increasing the circulation for The Sunday Telegraph. Operationally,
efficiencies in producing the newspapers are expected to continue at the West
Ferry and Trafford Park printing operations.

At the Canadian Newspaper Group, following the asset sales completed
during the year, the Company continues to own a group of community newspapers
and magazines and a 50% interest in National Post. It is expected that the
balance of the community newspapers and magazines will be sold during 2001. The
focus for National Post is to reduce the level of operating losses by
increasing circulation, particularly in the greater Toronto area, and
increasing advertising revenue while controlling operating costs.

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The Company and Hollinger Inc. have historically agreed that the Company
will be Hollinger Inc.s principal vehicle for engaging in and effecting
acquisitions in the newspaper business and in related media businesses in the
United States, Israel, the United Kingdom and the
rest of the European Community. Hollinger Inc. reserved the ability to pursue
all media (including newspaper) acquisition opportunities outside these areas
and all media acquisition opportunities unrelated to the newspaper business
throughout the world.

The Company has developed a
comprehensive internet and technology strategy. These activities fall into three main areas: (1) websites related to the various
print publications, which are 100% owned and reported within the traditional
newspaper segments; (2) joint ventures between our print publications and
unrelated outsiders, where each adds value and where the Company has a certain
amount of control; and (3) minority venture capital investments in unrelated third parties.

The print-related and joint venture strategies represent an opportunity to
fortify the newspapers in their local markets by providing them with the
necessary tools to offer a complete suite of online and print options for
their clients. The Company has stayed competitive by building significant
websites at all our major newspapers. The strategy is specifically designed to
achieve rapid acceleration of the Web activities. The Company is building a
solid foundation for expansion and growth, an even more valuable asset base,
and technology and services which further strengthen the print and online
publications.

The Companys strategy regarding minority investments is primarily to
identify promising internet and technology opportunities and make investments that are
eventually expected to be monetized. Often a significant part of the
purchase price of these investments is paid for with advertising in
our publications.

Risks

Certain statements contained in this report under various sections,
including but not limited to Business Strategy and Managements Discussion
and Analysis, are forward-looking statements that involve risks and
uncertainties. Such statements are subject to the following important factors,
among others, which in some cases have affected, and in the future could
affect, the Companys actual results and could cause the Companys actual
consolidated results for the first quarter of 2001, and beyond, to differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, the Company:



| |  |  | International Holding Company Structure  The Company is an
international holding company and its assets consist solely of
investments in its subsidiaries and affiliated companies. As a
result, the Companys ability to meet its future financial obligations
is dependent upon the availability of cash flows from its United
States and foreign subsidiaries through dividends, intercompany
advances, management fees and other payments. Similarly, the
Companys ability to pay dividends on its common stock and its
preferred stock may be limited as a result of its dependence upon the
distribution of earnings of its subsidiaries and affiliated companies.
The Companys subsidiaries and affiliated companies are under no
obligation to pay dividends and, in the case of Publishing and its
principal United States and foreign subsidiaries, are subject to
statutory restrictions and restrictions in debt agreements that limit
their ability to pay dividends. Substantially all of the shares of
the subsidiaries of the Company have been pledged to lenders of the
Company. The Companys right to participate in the distribution of
assets of any subsidiary or affiliated company upon its liquidation or
reorganization will be subject to the prior claims of the creditors of
such subsidiary or affiliated company, including trade creditors,
except to the extent that the Company may itself be a creditor with
recognized claims against such subsidiary or affiliated company.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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| |  |  | Growth Strategy  The Companys strategy is to achieve growth through
improvements in the cash flow
and profitability of its newspapers, principally through cost
reductions.  The Companys growth strategy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |   |  | presents risks inherent in evaluating the costs of new growth opportunities at existing
operations and in managing the numerous publications it has acquired and
improving their operating efficiency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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| |  |  | Restrictions in Debt Agreements and Other Restrictive Arrangements  The
Company and its subsidiaries have substantial leverage and substantial
debt service obligations as well as obligations under the preferred stock
of the Company. The instruments governing the terms of the principal
indebtedness and redeemable preferred stock of the Company, Publishing and
its principal United States and foreign subsidiaries, contain various
covenants, events of default and other provisions that could limit the
financial flexibility of the Company, including the payment of dividends
with respect to outstanding common stock and preferred stock and the
implementation of its growth strategy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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| |  |  | Cyclicality of Revenues  Advertising and, to a lesser extent,
circulation revenues of the Company, as well as those of the newspaper
industry in general, are cyclical and dependent upon general economic
conditions. Historically, increases in advertising revenues have
corresponded with economic recoveries while decreases, as well as changes
in the mix of advertising, have corresponded with general economic
downturns and regional and local economic recessions. The Company
believes, however, that the geographic diversity of its global operations
may mitigate, to some degree, the effects of an economic downturn in any
particular market served by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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| |  |  | Newsprint Costs  Newsprint represents the single largest raw material
expense of the Companys newspapers throughout the world and, together
with employee costs, is one of the most significant operating costs.
Newsprint costs vary widely from time to time. The Company expects
that while newsprint prices could continue to show significant
variations during 2001, prices in North America are not expected to
increase significantly from current levels. In the United Kingdom,
newsprint prices payable by the Company in 2001, which are subject to
longer-term contracts, will likely increase from the prices paid in
2000 because the contracts in effect for much of 2000 were booked at
prices that were well below prices that prevailed in North America. Since the beginning
of 2000, spot prices for newsprint have increased by more than 20%.
Although the Company has implemented measures in an attempt to offset
a rise in newsprint prices, such as reducing page width where
practical, and managing its return policy, price increases have had an
adverse effect on the Companys results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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| |  |  | Foreign Operations and Currency Exchange Rates  Operations outside of
the United States accounted for approximately 77.6% of the Companys
operating revenues and approximately 92.2% of the Companys operating
income for the year ended December 31, 2000. Generally, the Company
does not hedge against foreign currency exchange rate risks except
through borrowings in those currencies. As a result, the Company may
experience economic loss and a negative impact on earnings with
respect to its investments and on dividends from its foreign
subsidiaries, solely as a result of currency exchange rate
fluctuations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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| |  |  | Newspaper Industry Competition  Revenues in the newspaper industry
are dependent primarily upon advertising revenues and paid
circulation. Competition for advertising and circulation revenue
comes from local and regional newspapers, radio, broadcast and cable
television, direct mail, and other communications and advertising
media that operate in the Companys markets. The extent and nature of
such competition is, in large part, determined by the location and
demographics of the markets and the number of media alternatives in
those markets. Some of the Companys competitors are larger and have
greater financial resources than the Company. For example, in the
Chicago metropolitan area, the Chicago Sun-Timescompetes with a large
established metropolitan daily and Sunday newspaper that is the fifth
largest metropolitan paid daily and Sunday newspaper in the United States.
In the United Kingdom, The Daily Telegraphcompetes with other
national newspapers, principally The Times, which over the past
several years has from time to time substantially reduced its cover
price in an effort to increase its circulation. The Telegraph has met
this competition and has from time to time engaged in its own price
reduction or promotional initiatives. Electronic media is becoming a
larger factor in newspaper industry competition. Management continues
to hold the view that newspapers will continue to be an important
business segment. Among educated and affluent people, indications are
that strong newspaper readership will continue. Alternate forms of
information delivery such as the Internet could impact newspapers, but
recognition of the Internets potential combined with a strong
newspaper franchise could be a platform for Internet operations.
Newspaper readers can be offered a range of Internet services as
varied as the content. Virtually all newspapers are now published on
the Internet as well as in the traditional newsprint format. These
competitive activities can and have from time to time had an adverse
effect on revenues and operating costs.

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Chicago Group

Sources of Revenue.The following table sets forth the sources of revenue
and the percentage such sources represent of total revenues for the Chicago
Group during the past three years.

|                       |  |      |                        |  |      |  |     |      |                         |   |         |  |  |  |     |   |  |   |         |  |  |  |    
|---------------------- |  | ---- | ---------------------- |  | ---- |  | --- | ---- | ----------------------- | - | ------- |  |  |  | --- | - |  | - | ------- |  |  |  | ---
|                       |  |      |                        |  |      |  |     |      | Year Ended December 31,
|                       |  |     
|                       |  | 2000 |                        |  | 1999 |  |     | 1998
|                       |  |      |                        |  |      |  |     |     
|                       |  |      | (dollars in thousands)
|Advertising            |  | $    | 305,027                |  |      |  | 76  | %    |                         | $ | 294,124 |  |  |  | 75  | % |  | $ | 281,615 |  |  |  | 74 
|                      
|                      
|                      
|                      
|Circulation            |  |      | 80,261                 |  |      |  | 20  |      |                         |   | 80,551  |  |  |  | 21  |   |  |   | 82,534  |  |  |  | 22 
|                      
|                      
|                      
|                      
|Job printing
and other |  |      | 16,129                 |  |      |  | 4   |      |                         |   | 15,798  |  |  |  | 4   |   |  |   | 14,960  |  |  |  | 4  
|                       |  |      |                        |  |      |  |     |      |                         |   |         |  |  |  |     |   |  |   |         |  |  |  |    
|Total                  |  | $    | 401,417                |  |      |  | 100 | %    |                         | $ | 390,473 |  |  |  | 100 | % |  | $ | 379,109 |  |  |  | 100
|                       |  |      |                        |  |      |  |     |      |                         |   |         |  |  |  |     |   |  |   |         |  |  |  |    

Advertising.Substantially all advertising revenues are derived from
local and national retailers and classified advertisers. Advertising rates and
rate structures vary among the publications and are based, among other things,
on circulation, penetration and type of advertising (whether classified,
national or retail). In 2000, retail advertising accounted for the largest
share of advertising revenues (48%), followed by classified (39%) and
national (13%).

The Chicago Sun-Timesoffers a variety of advertising alternatives,
including full-run advertisements, geographically zoned issues, special
interest pull-out sections and advertising supplements in addition to regular
sections of the newspaper targeted to different readers, such as arts, food,
real estate, TV listings, weekend, travel and special sections. The Chicago
area suburban newspapers also offer weekly both separate and special sections.
The Chicago Group operates the Sun-Times Newspaper Network, an advertising
vehicle that can reach the combined readership base of all the Chicago Group
publications, with the exception of the recently acquired Copley Chicago
Suburban newspapers. The Chicago Group continues to strengthen its online
dominance. www.classifiedschicago.com regional classified-advertising website,
which was created through a partnership with Paddock Publications, pools classified
advertisements from nearly 100 daily and weekly newspapers including three of the Chicago
metropolitan areas biggest dailies, to create a valuable new venue for
advertisers, readers and on-line users. In keeping with the focus of online
classified advertising, during 2000, the Chicago Group joined again with
Paddock Publications and a new partner, the Chicago Automobile Trade Association, to
launch an automotive website. The new site, www.DriveChicago.com pools the automotive
classified advertising of three of Chicago metropolitan areas biggest dailies
with the automotive inventories of many of Chicagos metropolitan car dealerships.

Circulation.Circulation revenues are derived from single copy newspaper
sales made through retailers and vending racks and home delivery newspaper
sales to subscribers. Approximately 65% of the copies of the Chicago Sun-Times
sold in 2000 were single copy sales. Approximately 78% of 2000 circulation
revenues of the Chicago area suburban newspapers were derived from subscription
sales.

The average paid daily and Sunday circulation of the Chicago Sun-Timesis
approximately 478,000 and 393,000, respectively. The daily and Sunday paid
circulation of the Daily Southtownis approximately 51,000 and 60,000,
respectively. The daily and Sunday paid circulation of the Post-Tribuneis
approximately 64,000 and 67,000, respectively. The aggregate non-daily paid
and free circulation of the Chicago area suburban newspapers is approximately
314,000 and 975,000, respectively. The average paid daily and Sunday
circulation of the recently acquired Copley Chicago Suburban newspapers is
approximately 105,000 and 92,000, respectively,

Competition.Each of the Companys Chicago area newspapers competes in
varying degrees with radio, television, direct marketing and other
communications and advertising media as well as with other newspapers having
local, regional or national circulation. The Chicago metropolitan region is
comprised of Cook County and six surrounding counties and is served by eight
local daily newspapers of which the Company owns six.

- 6 -



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The Chicago Sun-Timescompetes in the Chicago region with the Chicago
Tribune, a large established metropolitan daily and Sunday newspaper, which is
the fifth largest metropolitan daily newspaper in the United States based on circulation
The Chicago-Sun Times is the ninth largest metropolitan daily
newspaper in the United States, based on circulation. In addition, the Chicago
Sun-Timesand other Chicago Group newspapers face competition from other
newspapers published in adjacent or nearby locations and circulated in the
Chicago metropolitan area market.

Employees and Labor Relations.As of March 21, 2001, the Chicago Group
employed approximately 4,300 employees (including approximately 1,000 part-time
employees). Approximately 1,600 employees are represented by 24 collective
bargaining units. Employee costs (including salaries, wages, fringe benefits,
employment-related taxes and other direct employee costs) equaled approximately
38% of the Chicago Groups revenues in the year ended December 31, 2000. There
have been no strikes or general work stoppages at any of the Chicago Groups
newspapers in the past five years. The Chicago Group believes that its
relationships with its employees are generally good.

Raw Materials.The basic raw material for newspapers is newsprint.
Newsprint costs equaled approximately 17% of the Chicago Groups revenues in
the year ended December 31, 2000. Average newsprint prices for the Chicago
Group increased about 7% in 2000 from 1999. The Chicago Group is not dependent
upon any single newsprint supplier. To ensure an adequate supply of newsprint,
the Chicago Group has newsprint supply contracts with certain minimum purchase
requirements. The Chicago Group, like other newspaper publishers in
North America, has not
entered into any long-term fixed price newsprint supply contracts in the
current environment of newsprint costs. The Chicago Group believes that its
sources of supply for newsprint are adequate for its anticipated needs.

Environmental.
The Company in common with other newspaper companies engaged in
similar operations, is subject to a wide range of federal, state and
local environmental laws and regulations pertaining to air and water
quality, storage tanks, and the management and disposal of wastes at
its major printing facilities. These requirements are becoming
increasingly more stringent. The Company believes that compliance with
these laws and regulations will not have a material adverse effect on
the Company.

Community Group

The Community Group consisted of smaller newspaper publications in the
United States and The Jerusalem Postin Israel. The Community Groups United
States daily newspapers were typically the only paid daily newspapers of
general circulation in their respective communities. During 2000, the Company
sold virtually all of its United States Community Group newspapers with only
one Community Group newspaper remaining at December 31, 2000.

Sources of Revenue.The following table sets forth the sources of revenue
and the percentage that such sources represent of total revenues for the
Community Group, including Jerusalem Post, during the past three years.

|                       |  |                         |        |      |  |      |     |   |  |   |        |  |  |  |     |   |  |   |         |  |  |  |     |  
|---------------------- |  | ----------------------- | ------ | ---- |  | ---- | --- | - |  | - | ------ |  |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|                       |  | Year Ended December 31,
|                       |  |                        
|                       |  | 2000                    |        | 1999 |  | 1998
|                       |  |                         |        |      |  |     
|                       |  | (dollars in thousands) 
|Advertising            |  | $                       | 38,294 |      |  |      | 57  | % |  | $ | 57,535 |  |  |  | 60  | % |  | $ | 135,216 |  |  |  | 64  | %
|                      
|                      
|                      
|                      
|Circulation            |  |                         | 19,168 |      |  |      | 28  |   |  |   | 26,618 |  |  |  | 27  |   |  |   | 49,449  |  |  |  | 24  |  
|                      
|                      
|                      
|                      
|Job printing
and other |  |                         | 9,874  |      |  |      | 15  |   |  |   | 12,521 |  |  |  | 13  |   |  |   | 25,442  |  |  |  | 12  |  
|                       |  |                         |        |      |  |      |     |   |  |   |        |  |  |  |     |   |  |   |         |  |  |  |     |  
|Total                  |  | $                       | 67,336 |      |  |      | 100 | % |  | $ | 96,674 |  |  |  | 100 | % |  | $ | 210,107 |  |  |  | 100 | %
|                       |  |                         |        |      |  |      |     |   |  |   |        |  |  |  |     |   |  |   |         |  |  |  |     |  

Jerusalem
Post.Over 40% of Jerusalem Posts revenues of $21.1 million in
2000 were derived from circulation, with 32% from job printing and other and
28% from advertising. Jerusalem Post derives a relatively high percentage of
its revenues from job printing as a result of a long-term contract to print and
bind copies of the Golden Pages, Israels equivalent of a Yellow Pages
telephone directory. Newsprint costs relating to publication of The Jerusalem
Postequaled approximately 8.5% of Jerusalem Posts revenues in 2000. Newsprint
used in producing the Golden Pages is provided by the owners of that
publication.

Newspapers in Israel are required by law to obtain a license from the
countrys interior minister, who is authorized to restrain publication of
certain information if, among other things, it may endanger public safety. To
date, Jerusalem Post has not experienced any difficulties in maintaining its
license to publish or been subject to any efforts to restrain publication. In
addition, all written media publications in Israel are reviewed by Israels
military censor prior to publication in order to prevent the publication of
information that could threaten national security. Such censorship is
considered part of the ordinary course of business in the Israeli media and has
not adversely affected Jerusalem Posts business in any significant way.

- 7 -



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Environmental. The Company, in common with other newspaper companies engaged in similar
operations, is subject to a wide range of federal, state and local
environmental laws and regulations pertaining to air and water quality, storage
tanks, and the management and disposal of wastes at its major printing
facilities. These requirements are becoming increasingly more stringent. The
Company believes that compliance with these laws and regulations will not have
a material adverse effect on the Company.

U.K. Newspaper Group

The Telegraph

The United Kingdom National Newspaper Industry.The newspaper market in
the United Kingdom is segmented and, within each segment, highly competitive.
The market segment in which The Daily Telegraphcompetes is generally known as
the quality daily newspaper segment. This segment consists of all the
broadsheets and none of the tabloid daily newspapers. The Daily Telegraphand
its competitors in this market segment appeal to the middle and upper end of
the demographic scale.

Newspapers in the United Kingdom differ from their counterparts in North
America in several respects. First, they traditionally have had
substantially fewer pages although the number of pages has been
increasing steadily over the past few years. The
Daily Telegraphis printed in one section on Tuesdays, Wednesdays and Fridays,
two sections on Mondays, three sections on Thursdays, and nine sections plus a
magazine and television guide on Saturdays. The Sunday Telegraphis published
in seven sections with two magazines. Second, pre-printed advertising inserts,
which have been a major source of revenue growth in North America, are less
common in the United Kingdom, but there has been an increase in advertiser
interest in such supplements. Third, the advertising to news ratio in British
newspapers is lower. Fourth, British national newspapers more closely
resemble North American magazines in that they have broad distribution and
readership across the country and derive a much larger portion of their
advertising revenue from national advertisers  unlike North American
newspapers which, because of their relatively small geographical distribution,
derive a substantial portion of their advertising from local advertisers.
Finally, newspapers in the United Kingdom generally have charged higher cover
prices, which in turn leads to higher circulation revenues than North American
newspapers with similar circulation bases. However, since September 1993, when
The Times, the nearest direct competitor to The Daily Telegraph, first
substantially reduced its cover price on its weekday newspaper, the national
newspaper market in the United Kingdom has experienced intense cover price
competition.

Sources of Revenue.The following table sets forth the sources of revenue
and their percentage of total revenues for the Telegraph during the past three
years.

|            |  |                                           |          |      |  |      |     |   |  |  |          |  |  |  |     |   |  |  |          |  |  |  |     |  
|----------- |  | ----------------------------------------- | -------- | ---- |  | ---- | --- | - |  |  | -------- |  |  |  | --- | - |  |  | -------- |  |  |  | --- | -
|            |  | Year Ended December 31,                  
|            |  |                                          
|            |  | 2000                                      |          | 1999 |  | 1998
|            |  |                                           |          |      |  |     
|            |  | (in
thousands of British pounds sterling)
|Advertising |  |                                           | £255,945 |      |  |      | 69  | % |  |  | £225,326 |  |  |  | 66  | % |  |  | £221,167 |  |  |  | 66  | %
|           
|           
|           
|           
|Circulation |  |                                           | 95,690   |      |  |      | 26  |   |  |  | 98,071   |  |  |  | 29  |   |  |  | 98,488   |  |  |  | 30  |  
|           
|           
|           
|           
|Other       |  |                                           | 19,020   |      |  |      | 5   |   |  |  | 16,575   |  |  |  | 5   |   |  |  | 12,403   |  |  |  | 4   |  
|            |  |                                           |          |      |  |      |     |   |  |  |          |  |  |  |     |   |  |  |          |  |  |  |     |  
|Total       |  |                                           | £370,655 |      |  |      | 100 | % |  |  | £339,972 |  |  |  | 100 | % |  |  | £332,058 |  |  |  | 100 | %
|            |  |                                           |          |      |  |      |     |   |  |  |          |  |  |  |     |   |  |  |          |  |  |  |     |  



---

|(1) |  | Financial data is in accordance with U.K. GAAP.
|--- |  | -----------------------------------------------

Advertising.Advertising is the largest source of revenue at The
Telegraph. The Telegraphs display advertising strengths are in the financial,
automobile and travel sections. The level of classified advertisements,
especially recruitment advertisements, fluctuates with the economy. The
Telegraphs strategy with respect to classified advertising is to improve
volume and yield in four sectors: recruitment, property, travel and
automobiles. Classified advertising revenue, which represents 29% of total
advertising revenue, increased in 2000 primarily due to a 15% increase in
recruitment advertising. Recruitment advertising is the largest classified
advertising category, representing about 53% of all classified advertising in
terms of revenue.

Circulation.The target audience of The Telegraphs newspapers is
generally conservative, middle and upper income readers, with a
continuing emphasis on gaining new younger readers. The editorial strengths of The

- 8 -



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Telegraphs newspapers provide national and international news, financial news
and features and comprehensive sports coverage.

In May 1996 the Telegraph introduced the first United Kingdom national
advance purchase subscription program. In the past, newspaper subscribers in
the U.K. dealt directly with independent newsagents for the purchase of
newspapers. A significant portion of newspaper readers did not take the
paper every day and this was especially true for Sunday. This program has
proven successful in driving circulation increases although there has been some
inevitable cannibalization of circulation revenues. By the end of 1996, the
plan had added about 100,000 new weekday and 200,000 new Sunday average sales
and the average prepaid subscription was for a period of about 40 weeks. In
order to gain broad acceptance of this revolutionary plan, the subscriptions
were offered at a significant discount. The amount of that discount was
reduced throughout 1997 and continued to be reduced thereafter. The program
currently has approximately 310,000 subscribers.

Other Publications and Business Enterprises.The Telegraph is involved in
several other publications and business enterprises, including The Spectator,
The Weekly Telegraphand telegraph.co.uk (formerly Electronic Telegraph).
telegraph.co.uk has more than a million registered users with some 80,000
logging on every day. The Telegraph utilizes its brand in developing third
party revenue opportunities including Reader Offers and Books Direct.

During 1999, the Company, in
cooperation with The Boots Company plc, UKs
leading beauty and health retailer, launched a new web site focusing on the
womens on-line market, www.handbag.com. The site deals with, among other things, health,
beauty and the arts.

Competition.In common with other national newspapers in the United
Kingdom, The Telegraphs newspapers compete for advertising revenue with other
forms of media, particularly television, magazine, direct mail, posters and
radio. In addition, total gross advertising expenditures, including financial,
display and recruitment classified advertising, are affected by economic
conditions in the United Kingdom.

Employees and Labor Relations.At March 21, 2001, The Telegraph and its
subsidiaries employed approximately 1,200 persons and the joint venture
printing companies employed an additional 1,100 persons. Collective agreements
between The Telegraph and the trade unions representing certain portions of The
Telegraphs workforce expired on June 30, 1990 and have not been renewed or
replaced. The absence of such collective agreements has had no adverse effect
on The Telegraphs operations and, in managements view, is unlikely to do so
in the foreseeable future.

The Telegraphs joint venture printing companies, West Ferry Printers and
Trafford Park Printers, each have in-house collective agreements with the
unions representing their employees and certain provisions of these collective
agreements are incorporated into the employees individual employment
contracts. In contrast to the union agreements that prevailed on Fleet Street
when Hollinger Inc. acquired control of The Telegraph, these collective
agreements provide that there shall be flexibility in the duties carried out by
union members and that staffing levels and the deployment of staff are the sole
responsibility of management. Binding arbitration and joint labor-management
standing committees are key features of each of the collective agreements.
These collective agreements may be terminated by either party by six months
prior written notice.

There have been no strikes or general work stoppages involving employees
of the Telegraph or the joint venture printing companies in the past five
years. Management of the Telegraph believes that its relationships with its
employees and the relationships of the joint venture printing companies with
their employees are good.

- 9 -



---



Raw Materials.Newsprint represents the single largest raw material
expense of the Telegraphs newspapers and, next to employee costs, is the most
significant operating cost. Approximately 180,000 metric tons are consumed
annually and in 2000 the total cost was approximately 18% of its newspaper
revenues. Prices are
fixed throughout 2001 at levels some 13% above the average price paid during
2000. Inventory held at each printing location is sufficient for
three to four days production and in addition, suppliers stock held in the
United Kingdom normally represents a further four to five
weeks consumption.

Printing.All copies of The Daily Telegraphand The Sunday Telegraphare
printed by The Telegraphs two 50% owned joint venture printing companies, West
Ferry Printers and Trafford Park Printers. The Telegraph has a very close
involvement in the management of the joint venture companies and regards them
as being important to The Telegraphs day-to-day operations. The magazine
sections of the Saturday edition of The Daily Telegraphand of The Sunday
Telegraphare printed under contract by external magazine printers.

The managements of both joint venture printing companies continually seek
to improve production performance. Major capital expenditures require the
approval of the boards of directors of the joint venture partners. There is
high utilization of the plants at West Ferry and Trafford Park Printers, with
little spare capacity. At Trafford Park Printers, revenue earned from contract
printing for third parties has a marginal effect on The Telegraphs printing
costs. West Ferry Printers also undertakes some contract printing for third
parties, which results in increased profitability.

West Ferry Printers has eighteen presses, six of which are configured for
The Telegraphs newspapers, eight are used for the newspapers published by The
Telegraphs joint venture partner, Express Newspapers plc, and the remaining
four for contract printing customers. Trafford Park Printers has four presses,
two of which are used primarily for The Telegraphs newspapers.

Distribution.Since 1988, The Telegraphs newspapers have been
distributed to wholesalers by truck under a contract with a subsidiary of TNT
Express (UK) Limited. During 1996, the Express titles and The Daily Telegraph
and The Sunday Telegraph, which are all printed at West Ferry Printers in
London, began distribution to wholesalers on the same trucks. At Trafford Park
Printers in Manchester, where The Daily Telegraph, The Sunday Telegraphand The
Guardianare printed, a joint distribution service was arranged. Previously,
the Express titles and the Guardian were distributed separately from the
Telegraph titles. The Telegraphs arrangements with wholesalers contain
performance provisions to ensure minimum standards of copy availability while
controlling the number of unsold copies.

Wholesalers distribute newspapers to retail news outlets. The number of
retail news outlets throughout the United Kingdom has increased as a result of
a 1994 ruling by the British Department of Trade and Industry that prohibits
wholesalers from limiting the number of outlets in a particular area. More
outlets do not necessarily mean more sales and The Telegraphs circulation
department has continued to develop its control of wastage while taking steps
to ensure that copies remain in those outlets with high single copy sales. In
addition to single copy sales, many retail news outlets offer home delivery
services. In 2000 home deliveries accounted for 41% of sales of The Daily
Telegraphand 42% of sales of The Sunday Telegraph.

Historically, wholesalers and retailers have been paid commissions based
on a percentage of the cover price. Prior to June 1994 when competitive
pressures caused The Telegraph to reduce its cover price, wholesaler

- 10 -



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and retailer commissions amounted to approximately 34% of the then cover price.
Notwithstanding the reduction of the cover price, the commissions paid were
not reduced. In line with other national newspapers, The Telegraph has
recently moved away from a commission paid on a percentage of cover price to a
fixed price in pence per copy and has reduced the amount paid to wholesalers
and retailers in terms of pence per copy.

Regulatory and Environmental Matters.United Kingdom companies are
subject to various competition laws, including the Restrictive Trade Practices
Act 1956-1976 (the RTPA), which requires the registration of certain
restrictive or information-sharing agreements with the Office of Fair Trading
and, under certain circumstances, prohibits such agreements. In common with
other major newspaper publishers, The Telegraph has given undertakings in
proceedings under the RTPA to the Restrictive Practices Court in respect of,
among other things, both daily and Sunday papers. These undertakings include a
general undertaking not to enter into any kind of agreement registrable under
the RTPA of which particulars are not furnished to the Office of Fair Trading
within the prescribed period. The Telegraph has also given a number of
specific undertakings (concerning pricing, wholesaler discounts and other
conditions upon which newspapers may be supplied) which prohibit the entering
of agreements containing the restrictions specified in the undertakings or any
agreements to the like effect. A breach of any of the undertakings may result
in The Telegraph (and potentially any individuals involved) being held in
contempt of court. The Telegraph has instituted procedures designed to ensure
that all personnel in relevant managerial positions are required to acknowledge
quarterly that they have been reminded of the requirements of the RTPA, the
meaning and scope of the undertakings given, the necessity of obtaining legal
advice in case of doubt and the consequences and seriousness of any breach. A
code of conduct, which contains this information, has been circulated among
relevant personnel.

The Telegraph and its joint venture printing companies, West Ferry
Printers and Trafford Park Printers, in common with other newspaper publishers
and printers, are subject to a wide range of environmental laws and regulations
promulgated by United Kingdom and European authorities. These laws are
becoming increasingly more stringent. Management of The Telegraph believes
that compliance with these laws and regulations will not have a material
adverse effect on The Telegraph.

Canadian Newspaper Group

Sources of Revenue.As indicated previously, on November 16, 2000 the
Company completed the sale to CanWest of 50% of National Post, the Canadian
Newspaper Group metropolitan and a large number of community newspapers and
certain operating Internet properties. Revenue for the years ended December
31, 2000 and 1999, of operations not sold at December 31, 2000 excluding
National Post, was Cdn.$390.9 million and
Cdn.$384.1 million, respectively. National Post revenue for the years ended
December 31, 2000 and 1999 was
Cdn.$135.4 million and Cdn.$104.2 million, respectively. The following table sets
forth the sources of revenue and the revenue mix of the total Canadian Newspaper Group, including
operations sold, during the past three years:

|                            |  |                                    |            |  |      |  |     |      |                         |      |            |  |  |  |     |   |  |      |            |  |  |  |    
|--------------------------- |  | ---------------------------------- | ---------- |  | ---- |  | --- | ---- | ----------------------- | ---- | ---------- |  |  |  | --- | - |  | ---- | ---------- |  |  |  | ---
|                            |  |                                    |            |  |      |  |     |      | Year Ended December 31,
|                            |  |                                   
|                            |  | 2000                               |            |  | 1999 |  |     | 1998
|                            |  |                                    |            |  |      |  |     |     
|                            |  | (in
thousands of Canadian dollars)
|Newspapers:
    Advertising |  | Cdn.                               | $1,158,678 |  |      |  | 73  | %    |                         | Cdn. | $1,207,673 |  |  |  | 73  | % |  | Cdn. | $1,118,248 |  |  |  | 71 
|                           
|                           
|                           
|                           
|Circulation                 |  |                                    | 287,513    |  |      |  | 18  |      |                         |      | 313,817    |  |  |  | 19  |   |  |      | 315,746    |  |  |  | 20 
|                           
|                           
|                           
|                           
|Job printing
and other      |  |                                    | 70,809     |  |      |  | 5   |      |                         |      | 69,380     |  |  |  | 4   |   |  |      | 80,193     |  |  |  | 5  
|                           
|                           
|                           
|                           
|Business Communications     |  |                                    | 62,193     |  |      |  | 4   |      |                         |      | 56,350     |  |  |  | 4   |   |  |      | 64,368     |  |  |  | 4  
|                            |  |                                    |            |  |      |  |     |      |                         |      |            |  |  |  |     |   |  |      |            |  |  |  |    
|Total                       |  | Cdn.                               | $1,579,193 |  |      |  | 100 | %    |                         | Cdn. | $1,647,220 |  |  |  | 100 | % |  | Cdn. | $1,578,555 |  |  |  | 100
|                            |  |                                    |            |  |      |  |     |      |                         |      |            |  |  |  |     |   |  |      |            |  |  |  |    

Advertising.Newspaper
advertising revenue in 2000, for operations not sold at
December 31, 2000, totalled Cdn. $287.0 million. Advertisements are carried either within the body of the
newspapers, and referred to as run-of-press (ROP) advertising, or as inserts
and other. ROP, which represented 88% of total advertising revenue
in 2000, for operations not sold, is
categorized as either retail, classified or national. The three
categories represented 43%, 22% and 35% respectively, of ROP
advertising revenue in 2000, for operations not sold at
December 31, 2000.

- 11 -



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Circulation.Circulation revenue is derived from subscription sales and
single copy sales. Approximately 67% of circulation revenue in 2000,
for operations not sold at December 31, 2000, was from
subscription sales.

Competition.The majority of revenues are from advertising. Advertising
linage in the newspapers is affected by a variety of factors including
competition from print, electronic and other media as well as general economic
performance and the level of consumer confidence. Specific advertising
segments such as real estate, automotive and help wanted will be significantly
affected by local factors.

Employees
and Labor Relations.As of March 21, 2001, the Canadian
Newspaper Group had approximately 3000 employees. This excludes
employees of UniMedia Inc. which was sold in January 2001. The Canadian Newspaper Group has union
contracts in place at approximately 24 of the 45 newspaper
operating locations. The percentage of unionized employees
varies widely from paper to paper. With the large number of contracts being renegotiated every
year, labor disruptions are always possible.

Raw Materials.The basic raw material for newspapers is newsprint.
Newsprint consumption in 2000, for operations not sold at
December 31, 2000 was approximately 82,000 tonnes. The newspapers within the
Canadian Newspaper Group have access to adequate supplies to meet anticipated
production needs. They are not dependent upon any single newsprint supplier.
The Canadian Newspaper Group, like other newspaper publishers in
North America, has not entered
into any long-term fixed price newsprint supply contracts in the current
environment of newsprint costs.

Regulatory Matters.The publication, distribution and sale of newspapers
and magazines in Canada is regarded as a cultural business under the
Investment Canada Act and consequently, any acquisition of control of Southam
by a non-Canadian investor would be subject to the prior review and approval by
the Minister of Industry of Canada. Because Hollinger International Inc. is
controlled by Hollinger Inc. that in turn is controlled by Canadians, the
current ownership is acceptable.

Relationship with the Hollinger Inc.The Company and Hollinger Inc.
directly own a combined 100% interest in Southam through Hollinger
Canadian Publishing Holdings Inc. (HCPH), a New Brunswick
holding company, in which Publishing and Hollinger Inc. own, directly or
indirectly, the following interests; (i) Publishing and its subsidiaries own
100% of the non-voting equity shares and non-voting preference shares and (ii)
each of Publishing and Hollinger Inc. (through its wholly-owned subsidiary) own
50% of the voting preference shares which have only nominal equity value. It
is anticipated that Hollinger Inc. will pledge its interest in HCPH as
collateral for bank financing arrangements of the Company and its subsidiaries.
The Company indirectly owns an 87.0% interest in Hollinger L.P. and a 50%
interest in National Post.

- 12 -



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Item 2. Properties

The Companys management believes that its properties and equipment are in
generally good condition, well-maintained, and adequate for current operations.

Chicago Group

The Chicago Sun-Timesconducts its editorial, pre-press, marketing, sales
and administrative activities in a 535,000 square foot, seven-story building in
downtown Chicago. The Company has nearly completed the full conversion of its
Chicago Sun-Timesproduction operations to a new 320,000 square foot state of
the art printing facility, at a total construction cost of approximately $115.0
million. It is intended that once conversion is completed, new facilities will
be identified to house the Chicago Sun-Timesnon-production activities and the
downtown Chicago building will be sold.

Pioneer Press utilizes and owns a building in north suburban Chicago for
editorial, pre-press, sales and administrative activities. Pioneer leases
several outlying satellite offices for its editorial and sales staff in
surrounding suburbs. Production currently occurs at a 65,000 square foot
leased building in a neighboring suburb. It is anticipated that the printing of
the Pioneer product will be moved to the new Chicago Sun-Timesprinting
facility by early summer 2001. Midwest Suburban Publishing utilizes one
building for editorial, pre-press, marketing, sales and administrative
activities. Production activities occur at a separate facility. Both
facilities are located in Chicagos south suburbs. The Post-Tribune editorial,
pre-press, marketing, sales and administrative activities are housed in the
newly completed facility in Merrillville, Indiana. The headquarters for the
newly acquired Copley Chicago Suburban newspapers is in Plainfield, Illinois.
This 172,000 square foot owned facility houses the press and administrative
activities as well as certain sales and marketing functions. The
editorial and sales activities are housed at five facilities located in
surrounding suburbs.

Community Group

The Jerusalem Postis produced and distributed in Israel from a
three-story building in Jerusalem owned by Jerusalem Post. The Jerusalem Post
also leases a sales office in Tel Aviv and a sales and distribution office in
New York.

U.K. Newspaper Group

The Telegraph occupies five floors of a tower on Canary Wharf in Londons
Docklands under a 25-year lease expiring in 2017. Printing of The Telegraphs
newspaper titles is carried out at fifty percent owned joint venture printing
plants in Londons Docklands and in Trafford Park, Manchester.

Canadian Newspaper Group

The Canadian Newspaper Groups newspapers and magazines are published at
numerous facilities throughout Canada. Southams magazines are printed at
facilities owned by third parties.

- 13 -



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Item 3. Legal Proceedings

The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its business, including such
matters as libel, defamation and invasion of privacy actions. In addition, the
Company is involved from time to time in various governmental and
administrative proceedings with respect to employee terminations and other
labor matters, environmental compliance, tax and other matters.

Management believes that the outcome of any pending claims or proceedings
will not have a material adverse effect on the Company taken as a whole. See
Note 16 to the Consolidated Financial Statements.

Item 4. Submission of Matters to a Vote of Security Holders

None

- 14 -



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Executive Officers of the Company

The following table sets forth the names and ages (as of March 21, 2001)
of each of the Companys current executive officers, followed by a description
of their principal occupations during the past five years and current
directorships of public reporting companies and investment companies in the
United States, Canada and the United Kingdom. Unless otherwise indicated, each
of the executive officers has held his or her position with the Company, or a
similar position with the Company, for at least the past five years.

|                                    |  |     |    |                           |  |                                                                                                      
|----------------------------------- |  | --- | -- | ------------------------- |  | -----------------------------------------------------------------------------------------------------
|Name                                |  | Age |    | Position with the Company
|                                    |  |     |    |                          
|The Hon. Conrad M. Black,
P.C., O.C |  |     | 56 |                           |  | Chairman of the Board, Chief Executive Officer and Director                                          
|                                   
|                                   
|                                   
|                                   
|F. David Radler                     |  |     | 58 |                           |  | Deputy Chairman, President, Chief Operating Officer and
Director                                     
|                                   
|                                   
|                                   
|                                   
|Daniel W. Colson                    |  |     | 53 |                           |  | Vice Chairman and Director and Deputy Chairman and Chief
Executive Officer of Telegraph Group Limited
|                                   
|                                   
|                                   
|                                   
|J. A. Boultbee                      |  |     | 57 |                           |  | Executive Vice President                                                                             
|                                   
|                                   
|                                   
|                                   
|Frederick A. Creasey                |  |     | 50 |                           |  | Group Corporate Controller                                                                           
|                                   
|                                   
|                                   
|                                   
|Barbara Amiel Black                 |  |     | 60 |                           |  | Vice President, Editorial and Director                                                               
|                                   
|                                   
|                                   
|                                   
|Paul B. Healy                       |  |     | 37 |                           |  | Vice President, Corporate Development and Investor Relations                                         
|                                   
|                                   
|                                   
|                                   
|Peter Y. Atkinson                   |  |     | 55 |                           |  | Vice President                                                                                       
|                                   
|                                   
|                                   
|                                   
|Mark S. Kipnis                      |  |     | 53 |                           |  | Vice President, Corporate Counsel and Secretary                                                      
|                                   
|                                   
|                                   
|                                   
|John D. Ferguson                    |  |     | 59 |                           |  | Vice President, Production                                                                           
|                                   
|                                   
|                                   
|                                   
|Frederic R. Lebolt                  |  |     | 47 |                           |  | Vice President, New Media                                                                            
|                                   
|                                   
|                                   
|                                   
|Robert T. Smith                     |  |     | 57 |                           |  | Treasurer                                                                                            
|                                   
|                                   
|                                   
|                                   
|Jerry J. Strader                    |  |     | 64 |                           |  | President, Suburban Chicago Newspaper Division                                                       

The Hon Conrad M. Black, P.C., O.C., Chairman of the Board of Directors,
Chief Executive Officer and Director, Hollinger International Inc., New York,
Chicago; Hollinger Inc., Toronto; Argus Corporation Ltd., Toronto. Mr. Black
has held these or equivalent or similar positions since 1978. He currently
serves as the Chairman and a Director of Telegraph Group Limited, London,
United Kingdom, and as a Director of the Jerusalem Post and The Spectator
(London). Mr. Black is also a director of Brascan Limited, the Canadian
Imperial Bank of Commerce, and CanWest Global Communications Corp. all of which
are public reporting companies in Canada, and as a director of Sothebys
Holdings, Inc. Mr. Black is Chairman of the Advisory Board of The National
Interest (Washington) and a member of the International Advisory Board of The
Council on Foreign Relations (New York).

F. David Radler, Deputy Chairman, President, Chief Operating Officer and
Director. Mr. Radler has served as President and Chief Operating Officer since
October 25, 1995, as Deputy Chairman since May 1998, and a Director since 1990.
Mr. Radler was Chairman of the Board of Directors from 1990 to October 25,
1995. Mr. Radler currently serves as President, Chief Operating Officer and
Deputy Chairman of Hollinger Inc., as a director of The
Telegraph and Hollinger Canadian Newspapers G.P. Inc., as Vice Chairman, President and Chief Operating
Officer and as a Director of Hollinger Canadian Publishing Holdings Inc. and as Director of Argus, Dominion Malting
Limited, West Fraser Timber Co. Ltd., and CanWest Global Communications Corp.
all of which are Canadian public reporting companies. Mr. Radler also serves
as a Director of the Jerusalem Post.

Daniel W. Colson, Vice Chairman and Director of the Company and Deputy
Chairman, Chief Executive Officer and Director of Telegraph Group Limited.
Mr. Colson has served as a Director of the Company since February 1995 and a
Vice Chairman since May 1998. He has served as Deputy Chairman of the
Telegraph since 1995 and as Chief Executive Officer of the Telegraph since 1994
and was Vice Chairman of the Telegraph from 1992 to 1995. Mr. Colson currently
serves as Vice Chairman and as a Director of Hollinger Digital Inc. He also
serves as Vice Chairman and a Director of Hollinger Inc., Hollinger Canadian
Publishing Holdings Inc. and Hollinger Canadian Newspapers G.P. Inc. and as Director of Argus and Molson Inc, all
of which are Canadian public reporting companies. Mr. Colson also serves as
Deputy Chairman and Director of Interactive Investor International.

J. A. Boultbee, Executive Vice President. Mr. Boultbee has served as
Executive Vice President since June 14, 1996 and as Chief Financial Officer
from 1995 to 1999. Mr. Boultbee served as a Vice President of the

- 15 -



---



Company from 1990 to June 13, 1996. Mr. Boultbee served as a Director from
1990 to October 25, 1995. Mr. Boultbee has served for the past five years as a
Director and as the Vice-President, Finance and Treasury and Executive Vice
President and Chief Financial Officer of Hollinger Inc. Mr. Boultbee also
serves as Executive Vice President and Chief Financial Officer and as a
Director of Hollinger Canadian Publishing Holdings Inc. and as a
Director of Argus, IAMGOLD Corporation and Consolidated Enfield Corporation, all of which are
Canadian public reporting companies.

Frederick A. Creasey, Group Corporate Controller. Mr. Creasey has served
as Group Corporate Controller since June 14, 1996. Mr. Creasey also has served
for the past five years as the Controller of Hollinger Inc. Mr. Creasey also
serves as Controller of Hollinger Canadian Publishing Holdings Inc.

Barbara Amiel Black, Vice President, Editorial and Director. Mrs. Black
has served as Vice President, Editorial since September 1995 and as a director
since February 1996. Mrs. Black is the wife of Mr. Black. After an extensive
career in both on and off-camera television production, Mrs. Black was the
editor of The Toronto Sunfrom 1983 to 1985, a columnist of The Timesand
senior political columnist of The Sunday Timesof London from 1986 to 1994 and
The Telegraphfrom 1994 to 1998. She has also been a columnist of Macleans
magazine since 1977. Mrs. Black also serves as Vice President, Editorial of
Hollinger Inc. and Hollinger Canadian Newspapers G.P. Inc., the
general partner of Hollinger Canadian Newspapers, Limited Partnership, a public
reporting company in Canada, and as a director of Hollinger Inc. and Jerusalem
Post. She is the author of two books: By Persons Unknown (Co-author), which
won the Mystery Writers of America Edgar Award for best non-fiction in 1978,
and Confessions, a book of political essays published in 1980, which won the
Canadian periodical publishers prize.

Paul B. Healy, Vice President, Corporate Development and Investor
Relations. Mr. Healy has served as Vice President, Corporate Development and
Investor Relations since October 25, 1995. Mr. Healy also serves as a Vice
President of Hollinger Canadian Publishing Holdings Inc.. Mr. Healy was a Vice President of The Chase Manhattan Bank,
N.A. for more than five years prior to October 1995, serving as a corporate
finance specialist in the media and communications sector.

Peter Y. Atkinson, Vice President. Mr. Atkinson has served as Vice
President since 1997. Mr. Atkinson has served as Vice President and Corporate
Counsel of Hollinger Inc. since 1996. Mr. Atkinson also serves as Vice
President and General Counsel and as a Director of Hollinger Canadian
Publishing Holdings Inc.. Mr. Atkinson was
previously a partner at the law firm of Aird & Berlis, which he joined in 1976.

Mark S. Kipnis, Vice President and Secretary. Mr. Kipnis has served as
Vice President and Secretary since January 1998 and as a Director of Jerusalem
Post since 1999. Mr. Kipnis also serves as Vice President of
Hollinger Canadian Publishing Holdings Inc.. Mr. Kipnis
also serves as a director of CoBiz Inc., a NASDAQ publicly traded company. Mr.
Kipnis was previously a partner at the law firm of Holleb & Coff, which he
joined in 1974.

John D. Ferguson, Vice President, Production. Mr. Ferguson has served as
Vice President, Production since 1996. Mr. Ferguson served as Vice President,
Production at Southam from 1993 to 1996. Mr. Ferguson was previously Deputy
Managing Director of Mirror Group PLC, which he joined in 1966.

Frederic
Lebolt, Vice President, New Media. Mr. Lebolt has served as Vice
President, New Media since February 1999. He has served as Vice President of
Hollinger Digital Inc. since 1997. Mr. Lebolt was previously Director of
Online Publications of the Chicago Sun-Times, which he joined in 1994.

Robert T. Smith,Treasurer. Mr. Smith has served as Treasurer since May
1998. Mr. Smith was Vice President of Chase Securities, Inc. and The Chase
Manhattan Bank in the Media and Telecommunications Group from 1987 to 1998 and
1976 through 1982. From 1983 to 1987, Mr. Smith served as Assistant Treasurer
for AT&T Long Lines and AT&T Communications, AT&Ts long distance subsidiary.

Jerry J. Strader,President, Suburban Chicago Newspaper Division. Mr.
Strader was appointed President of the Companys Suburban Chicago Newspaper
Division in September of 2000. He served as President of the Companys
Community Group (American Publishing Company) from February 1996 until August
2000. He served as Senior Vice President of American Publishing Company from
1994 to 1996 and as a Regional Manager of American Publishing Company and as
publisher of The Meridian Star, one of the Companys daily newspapers from 1990
to 1994.

- 16 -



---



PART II

Item 5. Market for the Registrants
Common Equity and Related Stockholder Matters

The Class A Common Stock is listed on the New York Stock Exchange under
the trading symbol HLR. At March 21, 2001 there were 84,285,671 shares of
Class A Common Stock outstanding and held by approximately 220 holders of
record and approximately 4000 beneficial owners. The Class B Common Stock of
the Company is not publicly traded. As of March 21, 2001, 14,990,000 shares of
Class B Common Stock were outstanding and owned by Hollinger Inc. The 134,126
shares of Series E Preferred Stock, held by Hollinger Inc., are convertible
into 891,173 shares of Class A Common Stock (as of March 21, 2001). The
Company issued in 1997, 829,409 shares of Series C Convertible Preferred Stock,
par value $0.1 per share (Series C Preferred Stock) to Hollinger Inc. The
Series C Preferred Stock was issued at $108.50 per share and pays a dividend of
9.5% per annum. The Series C Preferred Stock is convertible into 8,181,788
shares of Class A Common Stock (as of March 21, 2001).

The following table sets forth for the periods indicated the high and low
sales prices for the Class A Common Stock, as reported by the New York Stock
Exchange Composite Transactions Tape for the period since January 1, 1999, and
the cash dividends declared per share on the Class A Common Stock.

|                                       |  |             |        |                |  |           |        |  |  |          |        | 
|-------------------------------------- |  | ----------- | ------ | -------------- |  | --------- | ------ |  |  | -------- | ------ | 
|                                       |  | Price Range |       
|                                       |  |             |        | Cash Dividends
|                                       |  |             |        |                |  |           |        |  |  | Declared
|Calendar Period                        |  | High        |        | Low            |  | Per Share
|                                       |  |             |        |                |  |          
|1999                                  
|                                      
|                                      
|                                      
|                                      
|First Quarter                          |  | $           | 14.938 |                |  | $         | 11.125 |  |  | $        | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Second Quarter                         |  |             | 16.813 |                |  |           | 11.875 |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Third Quarter                          |  |             | 13.250 |                |  |           | 9.813  |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Fourth Quarter                         |  |             | 13.625 |                |  |           | 9.750  |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|2000                                  
|                                      
|                                      
|                                      
|                                      
|First Quarter                          |  | $           | 13.625 |                |  | $         | 10.063 |  |  | $        | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Second Quarter                         |  |             | 14.750 |                |  |           | 9.688  |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Third Quarter                          |  |             | 17.063 |                |  |           | 13.375 |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|Fourth Quarter                         |  |             | 16.875 |                |  |           | 13.875 |  |  |          | 0.1375 | 
|                                      
|                                      
|                                      
|                                      
|2001                                  
|                                      
|                                      
|                                      
|                                      
|First Quarter (through March 21, 2001) |  | $           | 16.490 |                |  | $         | 14.800 |  |  | $        | 0.1375 | 

On March 21, 2001 the closing price of the Class A Common Stock was $14.87
per share. Each share of Class A Common Stock and Class B Common Stock is
entitled to receive dividends if, as and when declared by the Board of
Directors of the Company. Dividends must be paid equally, share for share, on
both the Class A Common Stock and the Class B Common Stock at any time that
dividends are paid.

As an international holding company, the Companys ability to declare and
pay dividends in the future with respect to its Common Stock will be dependent,
among other factors, upon its results of operations, financial condition and
cash requirements, the ability of its United States and foreign subsidiaries to
pay dividends and make payments to the Company under applicable law and subject
to restrictions contained in existing and future loan agreements, the prior
payments of dividends to holders of Series C Preferred Stock and Series E
Preferred Stock, and other financing obligations to third parties relating to
such United States or foreign subsidiaries of the Company, as well as foreign
and United States tax liabilities with respect to dividends and payments from
those entities.

- 17 -



---



Item 6. Selected Financial Data

|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |           |          
|------------------------------------------------------------------------- | ------------------------------ | - | --------- | --------- | --------- | - | ---------------------------------------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | ---------
|                                                                          |                                |   |           |           |           |   | Year Ended December 31,                 
|                                                                          |                                |   |          
|                                                                          |                                |   |           |           |           |   | (In thousands, except per share amounts)
|                                                                          |                                |   | 2000      |           | 1999      |   | 1998                                     |           | 1997      |   | 1996     
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |          
|Statement of Operations
Data: (1)                                        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Operating revenues:                                                      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Advertising                    |   |           | $         | 1,543,882 |   |                                          | $         | 1,557,033 |   |           | $         | 1,565,790 |   |           | $         | 1,567,897 |   |           | $         | 1,364,527
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Circulation                    |   |           |           | 447,050   |   |                                          |           | 487,002   |   |           |           | 517,629   |   |           |           | 523,591   |   |           |           | 562,122  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Job printing                   |   |           |           | 59,089    |   |                                          |           | 48,207    |   |           |           | 70,461    |   |           |           | 80,024    |   |           |           | 80,132   
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other                          |   |           |           | 45,998    |   |                                          |           | 55,160    |   |           |           | 43,880    |   |           |           | 40,018    |   |           |           | 67,241   
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Total operating revenues                                                  |                                |   | 2,096,019 |           |           |   | 2,147,402                                |           |           |   | 2,197,760 |           |           |   | 2,211,530 |           |           |   | 2,074,022 |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Operating costs and expenses                                              |                                |   | 1,742,169 |           |           |   | 1,787,146                                |           |           |   | 1,774,661 |           |           |   | 1,783,995 |           |           |   | 1,782,053 |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Stock-based compensation                                                  |                                |   | 1,518     |           |           |   |                                         |           |           |   |          |           |           |   |          |           |           |   |          |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Infrequent items                                                          |                                |   | 7,950     |           |           |   | 22,046                                   |           |           |   | 26,172    |           |           |   | 25,243    |           |           |   | 41,567    |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Depreciation and amortization                                             |                                |   | 122,634   |           |           |   | 125,408                                  |           |           |   | 114,848   |           |           |   | 114,570   |           |           |   | 102,435   |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Operating income                                                          |                                |   | 221,748   |           |           |   | 212,802                                  |           |           |   | 282,079   |           |           |   | 287,722   |           |           |   | 147,967   |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Interest expense                                                          |                                |   | (142,713  | )         |           |   | (131,600                                 | )         |           |   | (105,841  | )         |           |   | (113,558  | )         |           |   | (84,356   | )        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Amortization of debt issue costs                                          |                                |   | (10,469   | )         |           |   | (16,209                                  | )         |           |   | (5,869    | )         |           |   | (13,466   | )         |           |   | (16,640   | )        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Equity in earnings of affiliates                                          |                                |   | (20,340   | )         |           |   | (2,106                                   | )         |           |   | (1,199    | )         |           |   | 5,807     |           |           |   | 12,050    |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Other income, net (2)                                                     |                                |   | 500,839   |           |           |   | 349,939                                  |           |           |   | 337,470   |           |           |   | 77,644    |           |           |   | 70,917    |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Earnings before income taxes,
minority
  interest and extraordinary items |                                |   | 549,065   |           |           |   | 412,826                                  |           |           |   | 506,640   |           |           |   | 244,149   |           |           |   | 129,938   |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Income taxes                                                              |                                |   | 374,898   |           |           |   | 155,203                                  |           |           |   | 223,099   |           |           |   | 93,655    |           |           |   | 51,865    |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Earnings before minority
  interest and extraordinary items               |                                |   | 174,167   |           |           |   | 257,623                                  |           |           |   | 283,541   |           |           |   | 150,494   |           |           |   | 78,073    |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Minority interest                                                         |                                |   | 50,760    |           |           |   | 7,088                                    |           |           |   | 81,562    |           |           |   | 45,973    |           |           |   | 33,138    |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Earnings before extraordinary items                                       |                                |   | 123,407   |           |           |   | 250,535                                  |           |           |   | 201,979   |           |           |   | 104,521   |           |           |   | 44,935    |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Extraordinary items                                                       |                                |   | (6,332    | )         |           |   | (5,183                                   | )         |           |   | (5,067    | )         |           |   |          |           |           |   | (2,150    | )        
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Net earnings                                                              |                                | $ | 117,075   |           |           | $ | 245,352                                  |           |           | $ | 196,912   |           |           | $ | 104,521   |           |           | $ | 42,785    |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Basic earnings per share                                                  |                                | $ | 1.10      |           |           | $ | 2.30                                     |           |           | $ | 1.65      |           |           | $ | 0.93      |           |           | $ | 0.41      |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|Cash dividends declared per common
share                                  |                                | $ | 0.55      |           |           | $ | 0.55                                     |           |           | $ | 0.475     |           |           | $ | 0.40      |           |           | $ | 0.40      |          
|                                                                          |                                |   |           |           |           |   |                                          |           |           |   |           |           |           |   |           |           |           |   |           |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Balance Sheet Data (1):                                                  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Working capital (deficit)      |   | $         | (257,506  | )         |   | $                                        | (113,115  | )         |   | $         | (141,688  | )         |   | $         | 56,365    |           |   | $         | (695,760  | )        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Total assets (4)               |   |           | 2,750,997 |           |   |                                          | 3,503,024 |           |   |           | 3,251,724 |           |   |           | 3,023,921 |           |   |           | 3,425,544 |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Minority interest              |   |           | 89,228    |           |   |                                          | 155,901   |           |   |           | 107,002   |           |   |           | 203,034   |           |   |           | 109,943   |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Total long-term debt (3)       |   |           | 812,248   |           |   |                                          | 1,653,936 |           |   |           | 1,499,518 |           |   |           | 1,428,415 |           |   |           | 711,348   |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Redeemable preferred stock     |   |           | 13,088    |           |   |                                          | 13,591    |           |   |           | 31,562    |           |   |           | 75,891    |           |   |           | 605,579   |          
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Total stockholders equity (5) |   |           | 857,197   |           |   |                                          | 902,225   |           |   |           | 817,921   |           |   |           | 687,602   |           |   |           | 686,326   |          

- 18 -



---



|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |           | 
|------------------------ | ------------------------ | - | --------- | --------- | ---- | - | ---------------------------------------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                         |                          |   |           |           |      |   | Year Ended December 31,                 
|                         |                          |   |          
|                         |                          |   |           |           |      |   | (In thousands, except per share amounts)
|                         |                          |   | 2000      |           | 1999 |   | 1998                                     |           | 1997 |   | 1996     
|                         |                          |   |           |           |      |   |                                          |           |      |   |          
|Segment Data (1):       
|                        
|                        
|                        
|                        
|Operating Revenues:     
|                        
|                        
|                        
|                        
|                         | Chicago Group            |   | $         | 401,417   |      |   | $                                        | 390,473   |      |   | $         | 379,109   |  |   | $         | 341,368   |  |   | $         | 333,632   | 
|                        
|                        
|                        
|                        
|                         | Community Group          |   |           | 67,336    |      |   |                                          | 96,674    |      |   |           | 210,107   |  |   |           | 292,265   |  |   |           | 273,740   | 
|                        
|                        
|                        
|                        
|                         | U.K. Newspaper Group     |   |           | 562,068   |      |   |                                          | 550,474   |      |   |           | 550,525   |  |   |           | 492,270   |  |   |           | 451,902   | 
|                        
|                        
|                        
|                        
|                         | Canadian Newspaper Group |   |           | 1,065,198 |      |   |                                          | 1,109,781 |      |   |           | 1,058,019 |  |   |           | 1,085,627 |  |   |           | 1,014,748 | 
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          
|Total Operating Revenues |                          | $ | 2,096,019 |           |      | $ | 2,147,402                                |           |      | $ | 2,197,760 |           |  | $ | 2,211,530 |           |  | $ | 2,074,022 |          
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          
|Operating Income (7)(8):
|                        
|                        
|                        
|                        
|                         | Chicago Group            |   | $         | 33,251    |      |   | $                                        | 45,234    |      |   | $         | 34,093    |  |   | $         | 37,862    |  |   | $         | 16,723    | 
|                        
|                        
|                        
|                        
|                         | Community Group          |   |           | 3,019     |      |   |                                          | 9,471     |      |   |           | 38,312    |  |   |           | 53,453    |  |   |           | 47,158    | 
|                        
|                        
|                        
|                        
|                         | U.K. Newspaper Group     |   |           | 85,755    |      |   |                                          | 70,007    |      |   |           | 66,458    |  |   |           | 49,224    |  |   |           | 33,928    | 
|                        
|                        
|                        
|                        
|                         | Canadian Newspaper Group |   |           | 109,191   |      |   |                                          | 110,136   |      |   |           | 169,388   |  |   |           | 172,426   |  |   |           | 91,725    | 
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          
|Total Operating Income   |                          | $ | 231,216   |           |      | $ | 234,848                                  |           |      | $ | 308,251   |           |  | $ | 312,965   |           |  | $ | 189,534   |          
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          
|EBITDA (6)(7)(8):       
|                        
|                        
|                        
|                        
|                         | Chicago Group            |   | $         | 57,334    |      |   | $                                        | 65,189    |      |   | $         | 54,404    |  |   | $         | 53,093    |  |   | $         | 34,268    | 
|                        
|                        
|                        
|                        
|                         | Community Group          |   |           | 9,265     |      |   |                                          | 18,571    |      |   |           | 57,579    |  |   |           | 79,880    |  |   |           | 72,439    | 
|                        
|                        
|                        
|                        
|                         | U.K. Newspaper Group     |   |           | 103,343   |      |   |                                          | 88,964    |      |   |           | 85,871    |  |   |           | 67,300    |  |   |           | 48,245    | 
|                        
|                        
|                        
|                        
|                         | Canadian Newspaper Group |   |           | 183,908   |      |   |                                          | 187,532   |      |   |           | 225,245   |  |   |           | 227,262   |  |   |           | 137,017   | 
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          
|Total EBITDA             |                          | $ | 353,850   |           |      | $ | 360,256                                  |           |      | $ | 423,099   |           |  | $ | 427,535   |           |  | $ | 291,969   |          
|                         |                          |   |           |           |      |   |                                          |           |      |   |           |           |  |   |           |           |  |   |           |          



---

|(1) |  | The financial data presented is derived from the Consolidated
Financial Statements of the Company and Management's Discussion and
Analysis of Financial Condition and Results of Operations Overview.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Other income, net, primarily includes the gain on the sale of Fairfax,
gain on the sale of investments and marketable securities, gains on sales
of newspaper operations, gain on the dilution of interest in Hollinger
L.P. and Interactive Investor International, write-off of investments,
total return equity swap, foreign currency gains (losses) and interest and
dividend income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|   
|   
|   
|(3) |  | Long-term debt does not include intercompany indebtedness owed to
Hollinger Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|   
|   
|   
|(4) |  | Includes intangible assets, net of accumulated amortization, which
amounted to $938,314,000 at December 31, 2000 and $2,031,610,000 at
December 31, 1999. Such intangible assets consist of the value of
acquired subscriber and advertiser lists, noncompetition agreements,
archives and goodwill. The amortization periods for intangible assets do
not exceed 40 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|(5) |  | See Consolidated Statements of Stockholders Equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|   
|   
|   
|(6) |  | EBITDA represents earnings before interest expense, interest and dividend
income, income taxes, depreciation and amortization, minority interest,
equity in earnings of affiliates, amortization of debt issue costs,
foreign currency gains and losses, extraordinary items, other income,
infrequent items and stock-based compensation. EBITDA is not intended to
represent an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Companys operating performance, or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. The Company believes that EBITDA
largely determines its ability to fund current operations and to service
debt, due to the significant number of acquisitions made by the Company
which have resulted in non-cash charges for depreciation and amortization.
These non-cash charges have adversely affected net earnings, but have not
affected EBITDA.
|   
|   
|   
|   
|(7) |  | Excludes infrequent items and stock-based compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|   
|   
|   
|(8) |  | Includes allocation of
corporate expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

- 19 -



---



Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations Overview

Overview

The Companys business is concentrated in the publication of newspapers in
the United States, Canada, United Kingdom, and Israel. Revenues are derived
principally from advertising, paid circulation and, to a lesser extent, job
printing. Of the Companys total operating revenues in 2000, approximately
19.0% were attributable to the Chicago Group, 3.0% to the Community Group,
27.0% to the U.K. Newspaper Group, and 51.0% to the Canadian Newspaper Group.
The Companys Chicago Group is comprised of the Chicago Sun-Timesand other
daily and weekly newspapers in the greater Chicago metropolitan area. The
Companys Community Group operated and published newspapers in small and medium
markets in the United States and also includes The Jerusalem Post. The
Companys U.K. Newspaper Group consists of the operations of the Telegraph
Group Ltd. (Telegraph), its subsidiaries and joint ventures. The Canadian
Newspaper Group consists of the operations of XSTM Holdings (2000) Inc.
(formerly Southam Inc.) (Southam), the Companys investment in Hollinger
Canadian Newspapers, Limited Partnership (Hollinger L.P.) and The National
Post Company (National Post).

During 2000, the Company sold virtually all of its United States Community
Group newspapers with only one Community Group newspaper and The Jerusalem Post
remaining at December 31, 2000. In addition, as described in greater detail
below, the Companys Canadian operations were significantly reduced on
completion of the sale to CanWest Global Communications Corp. (CanWest) of a
significant number of Canadian newspapers and Internet properties.

Over the past few years, the Company has developed a comprehensive
Internet strategy. Internet activities fall into three main areas: (1)
websites related to the various print publications, which are 100% owned and
reported within the traditional newspaper segments; (2) joint ventures between
our print publications and unrelated outsiders, where each adds value and over
which the Company has a certain amount of control; and (3) minority investments
in unrelated third parties. The print-related and joint venture strategies
represent an opportunity to fortify the newspapers in their local markets by
providing them with the necessary tools to offer a complete suite of online
and print options for their clients. The Company has remained competitive by
building significant websites at all our major divisions.

The Consolidated Financial Statements include the accounts of the Company
and its majority-owned subsidiaries and other controlled entities. At December
31, 2000, 1999 and 1998, the Companys interest in Southam was 100.0%, 100.0%
and 71.0%, respectively. The Companys interest in Hollinger L.P. was 87.0%
and 85.0% at December 31, 2000 and 1999. The Companys interest in National
Post was 50.0%, 100.0% and 100.0% at December 31, 2000, 1999 and 1998,
respectively. All intercompany balances and transactions have been eliminated
on consolidation.

Significant Transactions

In January 2000, 706,469 shares of the Companys Preferred Redeemable
Increased Dividend Equity Securities (PRIDES), the last remaining PRIDES not
held by related parties, were converted into 596,189 shares of Class A Common
Stock of the Company.

On February 17, 2000, Interactive Investor International, in which the
Company owned 51.7 million shares or a 47.0% equity interest acquired at a cost
of approximately $15.0 million, had its initial public offering (IPO),
issuing 52 million shares and raising £78.0 million ($125.8 million). The IPO
reduced the Companys equity ownership interest to 33% and resulted in the
recognition of a dilution gain of $17.0 million. Subsequently, the Company
sold five million shares of its holding, reducing its equity interest to 28.5%,
and resulting in a pre-tax gain of $1.6 million.

On November 16, 2000, the Company and its affiliates, Southam and
Hollinger L.P. (Hollinger Group) completed the sale of most of its Canadian
newspapers and related assets to CanWest. Included in the sale were the
following assets of the Hollinger Group:



| |  |  | a 50% interest in National Post, with the
Company continuing as managing partner;
| | - |  | ---------------------------------------------------------------------------------

- 20 -



---





| |  |  | the metropolitan and a large number of community
newspapers in Canada (including the Ottawa Citizen, The
Vancouver Sun, The Province (Vancouver), the Calgary Herald,
the Edmonton Journal, The Gazette (Montreal), The Windsor
Star,the Regina Leader Post,the Star Phoenixand the
Times-Colonist (Victoria); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the operating Canadian Internet properties,
including canada.com.                                                                                                                                                                                                                                                 

The sale resulted in the Hollinger Group receiving approximately Cdn. $1.7
billion ($1.1 billion) cash, approximately Cdn. $425 million ($277 million) in
voting and non-voting shares of CanWest at fair value (representing an
approximate 15.6% equity interest and 5.7% voting interest) and subordinated
non-convertible debentures of a holding company in the CanWest group at fair
value of approximately Cdn. $697 million ($456 million). The aggregate sale
price of these properties at fair value was approximately Cdn. $2.8 billion
($1.8 billion), plus closing adjustments for working capital at August 31, 2000
and cash flow and interest for the period September 1 to November 16, 2000
which in total approximates an additional $40.7 million. $972 million of the
cash proceeds from this sale were used to pay down the Companys Bank Credit
Facility.

During 2000, the Company sold most of its remaining U.S. community
newspaper properties including 11 paid dailies, three paid non-dailies and 31
free distribution publications for total proceeds of approximately $215.0
million. Pre-tax gains totaling $91.2 million were recognized on these sales.

In December 2000, the Company acquired four paid daily newspapers, one
paid non-daily and 12 free distribution publications in the Chicago suburbs,
for total consideration of $111.0 million.

In November 2000, Southam converted a promissory note from Hollinger L.P.
in the principal amount of Cdn. $225.8 million ($147.9 million) into 22,575,324
limited partnership units of Hollinger L.P., thereby increasing its interest in
Hollinger L.P. to 87.0%.

In January 1999, Hollinger Canadian Publishing Holdings Inc. (HCPH)
acquired 19,845,118 outstanding Southam common shares which had been tendered
pursuant to HCPHs offer to all Southam shareholders to acquire the shares for
Cdn. $25.25 cash per share after payment by Southam of a special dividend of
Cdn. $7.00 per share. The aggregate consideration paid was $327.5 million and
this purchase of shares brought the Companys ownership interest in Southam to
approximately 97%. The purchase price was funded through HCPHs portion of the
Southam special dividend together with borrowings by HCPH under the Bank Credit
Facility. In February 1999, HCPH purchased the remaining Southam common shares
pursuant to applicable Canadian law for aggregate consideration of $36.5
million.

During 1999, the Company solicited consents from the registered holders of
the Senior Notes and Senior Subordinated Notes to amend the indentures covering
said notes to (i) make the limitation on restricted payments covenant less
restrictive, (ii) make the consolidated cash flow ratio under the limitation on
indebtedness covenant more restrictive, and (iii) make the limitation on sale
of assets covenant less restrictive. The requisite consents were obtained in
March 1999 and the indentures governing the Senior Notes and Senior
Subordinated Notes were so amended.

In February 1999, the Company completed the sale of 45 U.S. community
newspaper properties for approximately $460.0 million, of which approximately
$441.0 million was cash. The proceeds from the sale were used to pay down
outstanding debt on the Bank Credit Facility. A pre-tax gain resulting from
this transaction of approximately $249.2 million was recognized on this
transaction.

During 1999, the Company sold to Horizon Publications Inc. 33 U.S.
community newspapers for $43.7 million resulting in a pre-tax gain of
approximately $20.7 million. Horizon Publications Inc. is managed by former
Community Group executives and owned by current and former Hollinger
International Inc. executives. Throughout 1999, the Company acquired five
community newspapers in the U.S. for total consideration of $24.5 million.

- 21 -



---



In April 1999, the Company formed Hollinger L.P. Hollinger L.P. acquired
48 daily newspapers, 180 non-daily newspapers and shopping guides and 106
magazines and specialty publications located across Canada from Southam,
UniMédia Inc. and Sterling Newspapers Company in exchange for promissory notes
due April 29, 2020 of $309.5 million (Cdn. $451.2 million) and 135,945,972
units in Hollinger L.P. The transfer of properties to Hollinger L.P. was
accounted for at historical carrying values and no gain was recognized on the
transfer.

On April 30, 1999, Hollinger L.P. completed a Cdn. $200.0 million ($137.2
million) private placement and investors subsequently received 20 million
partnership units of Hollinger L.P. During July 1999 Hollinger L.P. completed
its initial public offering issuing four million units at Cdn. $10 per unit for
total proceeds of Cdn. $40.0 million ($27.0 million). All partnership units,
including the 20 million units issued through the April 30, 1999 private
placement, are listed on The Toronto Stock Exchange. After the initial public
offering the Company continued to hold indirectly approximately 85% of the
equity of Hollinger L.P. The net proceeds of the offerings were applied to
reduce bank debt of the Hollinger Group. The reduction in the Companys
indirect ownership interest in Hollinger L.P. due to the sales of partnership
units resulted in the recognition of dilution gains of $77.3 million. The
Companys indirect ownership in the equity of Hollinger L.P. was 85.0% at
December 31, 1999.

On April 30, 1999,
Hollinger International Publishing Inc. (Publishing),
HCPH, Telegraph, Southam, HIF Corp. (HIF) and a group of financial
institutions entered into a Fourth Amended and Restated Credit Facility
(Restated Credit Facility) for a total of $725.0 million consisting of a
$475.0 million revolving credit line maturing on September 30, 2004 and a
$250.0 million term loan maturing on December 31, 2004. This facility replaced
the previous Bank Credit Facility. The loans under the Restated Credit
Facility bore interest, at the option of the respective borrower, at a rate per
annum tied to specified floating rates or a reserve adjusted Eurocurrency rate,
in each case plus a specified margin determined based on leverage ratios. On
June 4, 1999, the revolving credit line was increased by $50.0 million. On
September 30, 1999, the Restated Credit Facility was increased to $875.0
million when the revolving credit line and the term loan were each increased by
$50.0 million. As noted elsewhere, this facility was substantially repaid in
November 2000 with the facility being reduced to $5.0 million.

In January 1998, the Company completed a sale of approximately 80
community newspapers for aggregate cash consideration of approximately $310.0
million. The proceeds from the sale were used to repay notes at the Community
Group and pay down $175.0 million of outstanding debt on the Bank Credit
Facility. A pre-tax gain of $201.2 million was recognized on this transaction.
In addition, the Companys Canadian subsidiaries, in three separate
transactions in 1998, sold a magazine and four newspaper properties for total
proceeds of $267.4 million resulting in pre-tax gains of $161.8 million.

In three separate transactions in 1998, the Company and its subsidiaries
acquired five daily and certain community newspapers for total cash
consideration of $250.3 million. Included in these transactions was the
acquisition by Southam of the Financial Post Company, which published the
Financial Post.In October 1998, Southam launched the National Post, a new
national daily newspaper in Canada, incorporating the Financial Postas the
business section of the National Post.

During 1998, the Company issued an exchange offer to convert the PRIDES
into Class A Common Stock. 19,993,531 PRIDES were exchanged for 18,394,048
shares of Class A Common Stock.

During 1998, HCPH acquired 8,268,900 additional shares of Southam
increasing its ownership interest to 69.1%. Subsequently, Southam repurchased
some its own common shares, increasing the Companys ownership interest to
71.0%.

Subsequent Event

In November 2000, Hollinger L.P. approved the sale of UniMédia Company to
Gesca Limited, a subsidiary of Power Corporation of Canada. The sale closed
effective January 2001. The publications sold represent the
French- language
newspapers of Hollinger L.P. including three paid circulation dailies and 15
weeklies published in Quebec and Ontario.

- 22 -



---



The following table sets forth, for the periods indicated, certain items
and related percentage relationships included in the Companys Consolidated
Statements of Operations.

|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |       |  
|------------------------------------------ | ------------------------ | ---- | ------- | --------- |  | ---- | ------- | --------- |  | ---- | ------- | --------- |  |  | ---- | ----- | - |  | ---- | ----- | - |  | ---- | ----- | -
|Years Ended December 31,                   |                          | 2000 |         | 1999      |  | 1998 |         | 2000      |  | 1999 |         | 1998     
|                                           |                          |      |         |           |  |      |         |           |  |      |         |          
|(dollars in thousands)                    
|Operating revenue
    Chicago Group        |                          | $    | 401,417 |           |  | $    | 390,473 |           |  | $    | 379,109 |           |  |  | 19.2 | %     |   |  | 18.2 | %     |   |  | 17.3 | %    
|                                          
|                                          
|                                          
|                                          
|                                           | Community Group          |      |         | 67,336    |  |      |         | 96,674    |  |      |         | 210,107   |  |  |      | 3.2   |   |  |      | 4.5   |   |  |      | 9.6   |  
|                                          
|                                          
|                                          
|                                          
|                                           | U.K. Newspaper Group     |      |         | 562,068   |  |      |         | 550,474   |  |      |         | 550,525   |  |  |      | 26.8  |   |  |      | 25.6  |   |  |      | 25.0  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Canadian Newspaper Group |      |         | 1,065,198 |  |      |         | 1,109,781 |  |      |         | 1,058,019 |  |  |      | 50.8  |   |  |      | 51.7  |   |  |      | 48.1  |  
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|                                           | Total operating revenue  |      | $       | 2,096,019 |  |      | $       | 2,147,402 |  |      | $       | 2,197,760 |  |  |      | 100.0 | % |  |      | 100.0 | % |  |      | 100.0 | %
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|Operating income (4) (5)
    Chicago Group |                          | $    | 33,251  |           |  | $    | 45,234  |           |  | $    | 34,093  |           |  |  | 14.4 | %     |   |  | 19.3 | %     |   |  | 11.1 | %    
|                                          
|                                          
|                                          
|                                          
|                                           | Community Group          |      |         | 3,019     |  |      |         | 9,471     |  |      |         | 38,312    |  |  |      | 1.3   |   |  |      | 4.0   |   |  |      | 12.4  |  
|                                          
|                                          
|                                          
|                                          
|                                           | U.K. Newspaper Group     |      |         | 85,755    |  |      |         | 70,007    |  |      |         | 66,458    |  |  |      | 37.1  |   |  |      | 29.8  |   |  |      | 21.5  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Canadian Newspaper Group |      |         | 109,191   |  |      |         | 110,136   |  |      |         | 169,388   |  |  |      | 47.2  |   |  |      | 46.9  |   |  |      | 55.0  |  
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|                                           | Total operating income   |      | $       | 231,216   |  |      | $       | 234,848   |  |      | $       | 308,251   |  |  |      | 100.0 | % |  |      | 100.0 | % |  |      | 100.0 | %
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|EBITDA (2) (4) (5)
    Chicago Group       |                          | $    | 57,334  |           |  | $    | 65,189  |           |  | $    | 54,404  |           |  |  | 16.2 | %     |   |  | 18.0 | %     |   |  | 12.9 | %    
|                                          
|                                          
|                                          
|                                          
|                                           | Community Group          |      |         | 9,265     |  |      |         | 18,571    |  |      |         | 57,579    |  |  |      | 2.6   |   |  |      | 5.2   |   |  |      | 13.6  |  
|                                          
|                                          
|                                          
|                                          
|                                           | U.K. Newspaper Group     |      |         | 103,343   |  |      |         | 88,964    |  |      |         | 85,871    |  |  |      | 29.2  |   |  |      | 24.7  |   |  |      | 20.3  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Canadian Newspaper Group |      |         | 183,908   |  |      |         | 187,532   |  |      |         | 225,245   |  |  |      | 52.0  |   |  |      | 52.1  |   |  |      | 53.2  |  
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|                                           | Total EBITDA             |      | $       | 353,850   |  |      | $       | 360,256   |  |      | $       | 423,099   |  |  |      | 100.0 | % |  |      | 100.0 | % |  |      | 100.0 | %
|                                           |                          |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |      |      
|EBITDA Margin (3)
    Chicago Group        |                          |      |         |           |  |      |         |           |  |      |         |           |  |  | 14.3 | %     |   |  | 16.7 | %     |   |  | 14.4 | %    
|                                          
|                                          
|                                          
|                                          
|                                           | Community Group          |      |         |           |  |      |         |           |  |      |         |           |  |  |      | 13.8  | % |  |      | 19.2  | % |  |      | 27.4  | %
|                                          
|                                          
|                                          
|                                          
|                                           | U.K. Newspaper Group     |      |         |           |  |      |         |           |  |      |         |           |  |  |      | 18.4  | % |  |      | 16.2  | % |  |      | 15.6  | %
|                                          
|                                          
|                                          
|                                          
|                                           | Canadian Newspaper Group |      |         |           |  |      |         |           |  |      |         |           |  |  |      | 17.3  | % |  |      | 16.9  | % |  |      | 21.3  | %
|                                          
|                                          
|                                          
|                                          
|                                           | Total EBITDA             |      |         |           |  |      |         |           |  |      |         |           |  |  |      | 16.9  | % |  |      | 16.8  | % |  |      | 19.3  | %
|                                           | Total EBITDA             |      |         |           |  |      |         |           |  |      |         |           |  |  |      |       |   |  |      |       |   |  |     

(Footnotes following tables)

- 23 -



---



The following table sets forth, for the periods indicated, certain items
and related percentage relationships included in the Companys Consolidated
Statements of Operations.

|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |       |      | 
|--------------------------------------------------------- | ----------------------------------------- | ---------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- | 
|Years Ended December 31,                                  |                                           | 2000                   |         | 1999    |         | 1998 |         | 2000    |         | 1999 |         | 1998   
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |        
|(dollars in thousands)                                   
|Chicago Group
    Operating revenue
        Advertising   |                                           | $                      | 305,027 |         |         | $    | 294,124 |         |         | $    | 281,615 |         |         |  | 76.0 | %     |      |  | 75.4 | %     |      |  | 74.3 | %    
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Circulation            |         |         | 80,261  |      |         |         | 80,551  |      |         |         | 82,534  |  |      |       | 20.0 |  |      |       | 20.6 |  |      |       | 21.8 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Job printing and other |         |         | 16,129  |      |         |         | 15,798  |      |         |         | 14,960  |  |      |       | 4.0  |  |      |       | 4.0  |  |      |       | 3.9  | 
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Total operating revenue                   |                        |         | 401,417 |         |      |         | 390,473 |         |      |         | 379,109 |         |  |      | 100.0 |      |  |      | 100.0 |      |  |      | 100.0 |     
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Operating costs (1) (4)
(5)
    Newsprint |                        |         | 69,238  |         |      |         | 64,408  |         |      |         | 71,101  |         |  |      | 17.2  |      |  |      | 16.5  |      |  |      | 18.8  |     
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Compensation costs     |         |         | 151,648 |      |         |         | 147,951 |      |         |         | 145,635 |  |      |       | 37.8 |  |      |       | 37.9 |  |      |       | 38.4 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Other operating costs  |         |         | 123,197 |      |         |         | 112,925 |      |         |         | 107,969 |  |      |       | 30.7 |  |      |       | 28.9 |  |      |       | 28.5 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Depreciation           |         |         | 11,141  |      |         |         | 8,929   |      |         |         | 9,207   |  |      |       | 2.8  |  |      |       | 2.3  |  |      |       | 2.4  | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Amortization           |         |         | 12,942  |      |         |         | 11,026  |      |         |         | 11,104  |  |      |       | 3.2  |  |      |       | 2.8  |  |      |       | 2.9  | 
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Total operating costs                     |                        |         | 368,166 |         |      |         | 345,239 |         |      |         | 345,016 |         |  |      | 91.7  |      |  |      | 88.4  |      |  |      | 91.0  |     
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Operating income (1) (4) (5)              |                        | $       | 33,251  |         |      | $       | 45,234  |         |      | $       | 34,093  |         |  |      | 8.3   | %    |  |      | 11.6  | %    |  |      | 9.0   | %   
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|Community Group
    Operating revenue
        Advertising |                                           | $                      | 38,294  |         |         | $    | 57,535  |         |         | $    | 135,216 |         |         |  | 56.9 | %     |      |  | 59.5 | %     |      |  | 64.4 | %    
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Circulation            |         |         | 19,168  |      |         |         | 26,618  |      |         |         | 49,449  |  |      |       | 28.4 |  |      |       | 27.5 |  |      |       | 23.5 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Job printing and other |         |         | 9,874   |      |         |         | 12,521  |      |         |         | 25,442  |  |      |       | 14.7 |  |      |       | 13.0 |  |      |       | 12.1 | 
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Total operating revenue                   |                        |         | 67,336  |         |      |         | 96,674  |         |      |         | 210,107 |         |  |      | 100.0 |      |  |      | 100.0 |      |  |      | 100.0 |     
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Operating costs (1) (4)
(5)
    Newsprint |                        |         | 6,027   |         |      |         | 9,355   |         |      |         | 23,173  |         |  |      | 9.0   |      |  |      | 9.7   |      |  |      | 11.0  |     
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Compensation costs     |         |         | 25,056  |      |         |         | 35,665  |      |         |         | 70,496  |  |      |       | 37.2 |  |      |       | 36.9 |  |      |       | 33.6 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Other operating costs  |         |         | 26,988  |      |         |         | 33,083  |      |         |         | 58,859  |  |      |       | 40.1 |  |      |       | 34.2 |  |      |       | 28.0 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Depreciation           |         |         | 2,873   |      |         |         | 3,956   |      |         |         | 7,185   |  |      |       | 4.3  |  |      |       | 4.1  |  |      |       | 3.4  | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          |                                           | Amortization           |         |         | 3,373   |      |         |         | 5,144   |      |         |         | 12,082  |  |      |       | 4.9  |  |      |       | 5.3  |  |      |       | 5.8  | 
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Total operating costs                     |                        |         | 64,317  |         |      |         | 87,203  |         |      |         | 171,795 |         |  |      | 95.5  |      |  |      | 90.2  |      |  |      | 81.8  |     
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      
|                                                          | Operating income (1) (4) (5)              |                        | $       | 3,019   |         |      | $       | 9,471   |         |      | $       | 38,312  |         |  |      | 4.5   | %    |  |      | 9.8   | %    |  |      | 18.2  | %   
|                                                          |                                           |                        |         |         |         |      |         |         |         |      |         |         |         |  |      |       |      |  |      |       |      |  |      |      

(Footnotes following tables)

- 24 -



---



The following table sets forth, for the periods indicated, certain items
and related percentage relationships included in the Companys Consolidated
Statements of Operations.

|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |       |      | 
|------------------------------------------------------------------ | ----------------------------------------- | ---------------------- | ------- | --------- | ------- | ---- | ------- | --------- | ------- | ---- | ------- | --------- | ------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- | 
|Years Ended December 31,                                           |                                           | 2000                   |         | 1999      |         | 1998 |         | 2000      |         | 1999 |         | 1998     
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |          
|(dollars in thousands)                                            
|U.K. Newspaper Group
    Operating revenue
        Advertising     |                                           | $                      | 388,283 |           |         | $    | 365,005 |           |         | $    | 366,742 |           |         |  | 69.1 | %     |      |  | 66.3 | %     |      |  | 66.7 | %    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Circulation            |         |           | 145,099 |      |         |           | 158,683 |      |         |           | 163,206 |  |      |       | 25.8 |  |      |       | 28.8 |  |      |       | 29.6 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Job printing and other |         |           | 28,686  |      |         |           | 26,786  |      |         |           | 20,577  |  |      |       | 5.1  |  |      |       | 4.9  |  |      |       | 3.7  | 
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Total operating revenue                   |                        |         | 562,068   |         |      |         | 550,474   |         |      |         | 550,525   |         |  |      | 100.0 |      |  |      | 100.0 |      |  |      | 100.0 |     
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Operating costs (1) (4)
(5)
    Newsprint |                        |         | 91,836    |         |      |         | 97,045    |         |      |         | 101,750   |         |  |      | 16.3  |      |  |      | 17.6  |      |  |      | 18.5  |     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Compensation costs     |         |           | 97,551  |      |         |           | 91,870  |      |         |           | 88,604  |  |      |       | 17.4 |  |      |       | 16.7 |  |      |       | 16.1 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Other operating costs  |         |           | 269,338 |      |         |           | 272,595 |      |         |           | 274,300 |  |      |       | 47.9 |  |      |       | 49.5 |  |      |       | 49.8 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Depreciation           |         |           | 7,853   |      |         |           | 8,522   |      |         |           | 8,739   |  |      |       | 1.4  |  |      |       | 1.5  |  |      |       | 1.6  | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Amortization           |         |           | 9,735   |      |         |           | 10,435  |      |         |           | 10,674  |  |      |       | 1.7  |  |      |       | 1.9  |  |      |       | 1.9  | 
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Total operating costs                     |                        |         | 476,313   |         |      |         | 480,467   |         |      |         | 484,067   |         |  |      | 84.7  |      |  |      | 87.2  |      |  |      | 87.9  |     
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Operating income (1) (4) (5)              |                        | $       | 85,755    |         |      | $       | 70,007    |         |      | $       | 66,458    |         |  |      | 15.3  | %    |  |      | 12.8  | %    |  |      | 12.1  | %   
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|Canadian Newspaper Group
    Operating revenue
        Advertising |                                           | $                      | 812,278 |           |         | $    | 840,369 |           |         | $    | 782,217 |           |         |  | 76.3 | %     |      |  | 75.8 | %     |      |  | 74.0 | %    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Circulation            |         |           | 202,522 |      |         |           | 221,150 |      |         |           | 222,440 |  |      |       | 19.0 |  |      |       | 19.9 |  |      |       | 21.0 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Job printing and other |         |           | 50,398  |      |         |           | 48,262  |      |         |           | 53,362  |  |      |       | 4.7  |  |      |       | 4.3  |  |      |       | 5.0  | 
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Total operating revenue                   |                        |         | 1,065,198 |         |      |         | 1,109,781 |         |      |         | 1,058,019 |         |  |      | 100.0 |      |  |      | 100.0 |      |  |      | 100.0 |     
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Operating costs (1) (4)
(5)
    Newsprint |                        |         | 137,076   |         |      |         | 140,042   |         |      |         | 147,785   |         |  |      | 12.9  |      |  |      | 12.6  |      |  |      | 14.0  |     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Compensation costs     |         |           | 388,096 |      |         |           | 408,879 |      |         |           | 394,391 |  |      |       | 36.4 |  |      |       | 36.8 |  |      |       | 37.3 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Other operating costs  |         |           | 356,118 |      |         |           | 373,328 |      |         |           | 290,598 |  |      |       | 33.4 |  |      |       | 33.6 |  |      |       | 27.4 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Depreciation           |         |           | 42,679  |      |         |           | 42,746  |      |         |           | 34,711  |  |      |       | 4.0  |  |      |       | 3.9  |  |      |       | 3.3  | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                           | Amortization           |         |           | 32,038  |      |         |           | 34,650  |      |         |           | 21,146  |  |      |       | 3.0  |  |      |       | 3.1  |  |      |       | 2.0  | 
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Total operating costs                     |                        |         | 956,007   |         |      |         | 999,645   |         |      |         | 888,631   |         |  |      | 89.7  |      |  |      | 90.0  |      |  |      | 84.0  |     
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      
|                                                                   | Operating income (1) (4) (5)              |                        | $       | 109,191   |         |      | $       | 110,136   |         |      | $       | 169,388   |         |  |      | 10.3  | %    |  |      | 10.0  | %    |  |      | 16.0  | %   
|                                                                   |                                           |                        |         |           |         |      |         |           |         |      |         |           |         |  |      |       |      |  |      |       |      |  |      |      



---

|(1) |  | Percentage relationships are expressed as a percentage of total operating
revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | EBITDA represents earnings before interest expense, interest and dividend
income, income taxes, depreciation and amortization, minority interest,
equity in earnings of affiliates, amortization of debt issue costs,
foreign currency gains and losses, extraordinary items, other income,
infrequent items and stock-based compensation. EBITDA is not intended to
represent an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Companys operating performance, or cash flows from operating activities
(as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. The Company believes that EBITDA
largely determines its ability to fund current operations and to service
debt. The significant number of acquisitions made by the Company have
resulted in non-cash charges for depreciation and amortization, which have
adversely affected net income, but have not affected EBITDA.
|   
|   
|   
|   
|(3) |  | EBITDA Margin represents EBITDA divided by related operating revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(4) |  | Includes allocation of corporate expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|   
|   
|   
|(5) |  | Excludes infrequent items and stock-based compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

- 25 -



---



Results of Operations

2000 Compared with 1999

Net EarningsThe Company had net earnings of $117.1 million, or $1.10 per
share in 2000, compared with net earnings of $245.4 million, or $2.30 per share
in 1999. Earnings in 2000 and 1999 include a number of infrequent and
non-recurring items and the results for 2000 have been affected by changes in
accounting standards with respect to repriced options and the Companys total
return equity swap. Excluding infrequent and non-recurring items, and the
effects of changes in accounting standards, earnings for the year ended
December 31, 2000 were $52.7 million compared with $62.1 million in 1999 and
diluted earnings per share were $0.47 in 2000 compared with $0.53 in 1999.

Operating IncomeOperating income in 2000 was $221.7 million compared
with $212.8 million in 1999 an increase of $8.9 million. The increase in
operating income is due to several factors. Improved operating results at the
U.K. Newspaper Group and National Post were partly offset by a decrease in
operating income at the Chicago Group and sales of newspaper properties in the
Community Group in both 1999 and 2000 and in the Canadian Newspaper Group in
2000 have reduced operating income in 2000 compared with 1999. In addition, in
1999 infrequent items included a one-time expense related to a pension and
post retirement plan liability adjustment of $11.9 million.

Operating RevenuesOperating revenues were $2,096.0 million in 2000
compared to $2,147.4 million in 1999, a decrease of $51.4 million. The overall
decrease in revenue is primarily due to the 1999 and 2000 sales of Community
Group newspapers and the November 16, 2000 sale to CanWest of certain Canadian
newspaper properties. The effects of these sales have more than offset
increased operating revenues at the U.K. Newspaper Group and the National Post.

Operating ExpensesTotal operating costs and expenses were $1,874.3
million in 2000 compared to $1,934.6 million in 1999. Newsprint expense
decreased year over year by 2.1%. This decrease is primarily due to lower
consumption of newsprint resulting from the sale of Community newspaper
properties during both 1999 and 2000 and the November 16, 2000 sale of Canadian
properties to CanWest. In addition average newsprint prices in pounds sterling
at the U.K. Newspaper Group in 2000 were approximately 4% lower than in 1999.
These decreases were partly offset by increased consumption at the U.K.
Newspaper Group and an increase of 7% in the 2000 average newsprint price
compared with 1999 at the Chicago Group. Compensation costs decreased year
over year by $22.0 million or 3.2% and other operating costs decreased year
over year by $16.3 million or 2.1%. These reductions are mainly due to the
sales of properties. Depreciation in 2000 was $64.5 million compared with
$64.2 million in 1999. Lower depreciation resulting from the
sales of
properties in both the Community Group and Canadian Newspaper Group was offset
by increased depreciation at the Chicago Group related to the new printing
facility. Amortization in 2000 was $58.1 million compared with $61.3 million
in 1999, a decrease of $3.2 million. This decrease results from the sales of
properties. Operating expenses included infrequent items of $8.0 million in
2000, which primarily consisted of duplicated costs resulting from operating
two plants during the start-up of the new plant in Chicago. The production
facility is expected to be fully completed during 2001. In 1999, infrequent
items totaled $22.0 million and consisted primarily of costs related to the
start-up of the new plant in Chicago and accounting adjustments related to
pension liabilities. In addition, stock-based compensation expense in 2000
totaled $1.5 million and related to a change in the interpretation of
accounting principles in 2000 in respect of stock options that were repriced in
1999. There was no similar expense in 1999.

Interest ExpenseInterest expense was $142.7 million in 2000 compared
with $131.6 million in 1999, an increase of $11.1 million or 8.4%. This
increase results from higher debt levels until November 16, 2000 when the Bank
Credit Facility was repaid, increased interest rates throughout 2000 and the
impact of expensing rather than capitalizing pre-production interest costs
related to the new Chicago printing plant.

- 26 -



---



Amortization of Debt Issue CostsAmortization of debt issue costs in 2000
was $10.5 million and represents debt issue costs on the Senior Notes, Senior
Subordinated Notes and the Bank Credit Facility until November 16, 2000.
Amortization of debt issue costs in 1999 totaled $16.2 million and included
both regular amortization of these costs and a one-time write-off of issue
costs related to debt incurred to buyout the Southam minority in January 1999.

Interest and Dividend IncomeInterest and dividend income in 2000
amounted to $18.5 million compared with $7.7 million in 1999, an increase of
$10.8 million. This increase primarily results from interest on the CanWest
debentures from November 17 to December 31, 2000.

Foreign Currency Gains and LossesForeign currency losses in 2000 totaled
$16.0 million and in 1999 foreign currency gains totaled $13.8 million. The
2000 loss results entirely from the translation of amounts borrowed under the
Bank Credit Facility in U.S. dollars by a Canadian subsidiary and which were
repaid in November 2000. In 1999, $8.8 million of the gain resulted from
translation of the same U.S. dollar borrowings under the Bank Credit Facility.

Other IncomeNet other income in 2000 totaled $478.0 million and included
$493.2 million gains on sale of publishing interests, $32.6 million gains on
sales of investments, a $17.0 million dilution gain in respect of the
investment in Interactive Investor International, a $16.3 million loss in
respect of the total return equity swap, a $20.6 million write-off of
investments and $20.3 million losses from equity accounted companies. Other
income of $326.3 million in 1999 consisted primarily of gains on sales of
newspaper operations at the Community Group of $270.0 million and a $77.3
million gain on the dilution of the Companys interest in Hollinger L.P.

Minority InterestMinority interest in 2000 amounted to $50.8 million
compared with $7.1 million in 1999. Minority interest in 2000 includes the
minoritys share of Hollinger L.P., including the gain on sale of newspaper
properties to CanWest, $10.9 million related to the amount paid on mandatory
retirement of HCPH Special shares in excess of the recorded book amounts and
the minoritys share of the National Post loss subsequent to November 16, 2000.

Minority interest in 1999 represented the minoritys share of Hollinger L.P.
for May to December and the minoritys share of net earnings of Southam prior
to the Company acquiring the remaining minority share of Southam in January and
February 1999.

Chicago Group

Operating revenues for the Chicago Group were $401.4 million in 2000
compared with $390.5 million in 1999. Chicago Group results are based on
standard accounting periods which for 2000 has resulted in a 53 week year for
the Chicago Group only. The effect of the 53rd week was to add $6.0 million to
operating revenues and $6.2 million to operating cost and expenses. Operating
revenues for operations owned in both years based on a 52 week year were
$389.2 million in 2000 compared with $390.5 million in 1999. Advertising
revenue was up 0.4% while circulation revenue decreased 3.0% from 1999,
primarily at the Chicago Sun-Times. The ABC reported average daily circulation
for the Chicago Sun-Timesfor the fourth quarter of 2000 reflects an increase
of approximately 6,000 compared with the fourth quarter of 1999. However,
circulation revenue was lower resulting from price discounting to build and
maintain market share.

Total operating costs and expenses, excluding infrequent items, were
$368.2 million compared with $345.2 million in 1999. On a same store basis
operating costs and expenses were $362.1 million in 2000 compared with $345.3
million. This increase results from the impact of the 53rd week, newsprint
price increases, increased Internet costs and higher depreciation charges
related to the new printing facility.

- 27 -



---



On a same store basis,
excluding the 53rd week and Internet results,
operating income was $36.4 million in 2000 compared with $46.4 million in 1999.
The effect of the 53rd week on same store operating income was negligible.
Increases in newsprint expense and a decline in revenue on a 52-week basis
resulted in a $5.2 million decline in operating income with the balance of the
decline coming primarily from depreciation and amortization.

Community Group

Operating revenue and operating income in 2000 for the Community Group was
$67.3 million and $3.0 million respectively compared with $96.7 million and
$9.5 million respectively in 1999. The significant decrease in both operating
revenue and operating income results entirely from the sales in both 1999 and
2000 of Community Group newspaper properties. At December 31, 2000 only one
U.S. Community Group newspaper and The Jerusalem Postwere still owned by the
Company.

U.K. Newspaper Group

Operating revenues for the U.K. Newspaper Group were $562.1 million in
2000 compared with $550.5 million in 1999, an increase of 2.1%. However, in
British pounds sterling, total operating revenue increased 9.0% and advertising
revenue increased by 13.6%. Display advertising at the Telegraph increased by
16% year on year and this included a 29% increase in financial advertising.
Recruitment revenue increased by almost 15% year on year. Other classified
advertising performed well. The launch of a new travel section in the Sunday
Telegraph assisted in the increase in travel revenues of 11.5%. Property,
Automobile and Gardening advertising increased by 34%, 11.8% and 20.8% year on
year, respectively, reflecting the continued strength of the economy in the U.K.

In British pounds sterling, circulation revenue was down 2.4% year over
year primarily as a result of an increase in the sales to subscribers and a
decline in weekday newsstand sales.

Total operating costs, excluding infrequent items, were $476.3 million in
2000 compared with $480.5 million in 1999. Newsprint expense was $91.8 million
in 2000 compared with $97.0 million in 1999. This reflects a year over year
newsprint price decrease offset in part by increased consumption resulting from
the increase in advertising. The newsprint price decrease reflects the
longer-term purchasing methodology in the U.K. which usually causes a delay in
realizing the effect of newsprint price changes. Compensation and other costs
increased in pounds sterling compared with 1999, primarily from higher
production and editorial costs, higher marketing and promotion costs and an
increase in Internet costs. EBITDA, excluding infrequent items in 2000, was
$103.3 million compared with $89.0 million in 1999, an increase of 16.1%. In
pounds sterling EBITDA, excluding infrequent items, in 2000 was £67.8 million
compared with £54.8 million in 1999, an increase of 23.7%. In 2000 the average
exchange rate for the pound sterling into U.S. dollars was 1.52 compared with
1.62 in 1999.

Canadian Newspaper Group

Operating revenues in the Canadian Newspaper Group were $1,065.2 million
in 2000 compared with $1,109.8 million in 1999 and operating income was $109.2
million in 2000 compared with $110.1 million in 1999. The reported results
include the results of operations sold to CanWest for the period January 1 to
November 16, 2000 and for all of 1999. The National Post, which is included
throughout both years, had revenue and EBITDA losses of $90.9 million and $28.9
million respectively in 2000 compared with $70.3 million and $44.3 million
respectively in 1999.

Revenue and EBITDA for Canadian operations not sold at December 31, 2000,
excluding National Post, and reported in the year ended December 31, 2000 was
Cdn. $390.9 million and Cdn. $67.9 million as compared to Cdn. $384.1 million
and Cdn. $67.8 million in 1999.

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These amounts include revenue and EBITDA of Canadian operations sold
subsequent to December 31, 2000 of Cdn. $127.5 million and Cdn. $20.2 million
for 2000 and Cdn. $126.5 million and Cdn. $19.5 million for 1999. Included in
Canadian operations not sold are costs for Internet operations retained of Cdn.
$2.6 million in 2000 and Cdn. $2.4 million in 1999.

1999 Compared with 1998

Net EarningsThe Company had net earnings of $245.4 million, or $2.30 per
share in 1999, compared with net earnings of $196.9 million, or $1.65 per share
in 1998. Earnings in 1999 and 1998 included a number of infrequent and
non-recurring items. For the year ended December 31, 1999, earnings excluding
infrequent and non-recurring items were $62.1 million compared to $95.8 million
in 1998. Assuming all instruments were dilutive, diluted earnings per share
excluding infrequent and non-recurring items were $0.53 per share in 1999
compared to $0.78 per share in 1998.

Operating IncomeOperating income in 1999 was $212.8 million compared to
$282.1 million in 1998. The decrease in operating income was due to several
factors. Community Group newspaper operations sold during 1998 and 1999
contributed $30.6 million to reported operating income in 1998 and $1.2 million
in 1999. In addition, operating income in both 1999 and 1998 was affected by
start-up losses at the National Postof $48.7 million and $7.9 million,
respectively. Operating income in 1999 was also affected by increased
amortization of intangibles related to the acquisition of the remaining Southam
shares in January 1999 and increased losses from Internet activities.

Operating RevenuesOperating revenues were $2,147.4 million in 1999
compared to $2,197.8 million in 1998, a decrease of $50.4 million. The overall
decrease in revenue was primarily due to the 1999 and 1998 sales of newspaper
operations at the Community Group and the Canadian Newspaper Group. Newspaper
operations sold contributed $204.3 million to operating revenues in 1998 and
$17.9 million in 1999. The decreases in operating revenues resulting from
these sales were offset, to a large extent, by operating revenues from the
National Post, which commenced operations in October 1998 and 1998 acquisitions
at the Canadian Newspaper Group.

Operating ExpensesTotal operating costs and expenses were $1,934.6
million in 1999 compared to $1,915.7 million in 1998. Newsprint expense
decreased over the prior year by 9.6%. The decrease in newsprint expense was
primarily due to the decrease in newsprint price. Newsprint prices decreased
by 9.8% at the Chicago Group, 10.5% at the Community Group, 5.7% at the U.K.
Newspaper Group and 9.9% at the Canadian Newspaper Group. Lower consumption as
a result of the sale of newspaper operations at the Community Group was largely
offset by an increase in consumption at the Canadian Newspaper Group primarily
resulting from the National Post. Compensation costs decreased year over year
by $14.8 million or 2.1%. The overall reduction in compensation costs was due
to the sales of newspaper operations at the Community Group offset in part by
increased compensation resulting from the full year of operation of the
National Post. Other operating costs increased $60.2 million year over year
mainly as a result of 1999 including a full year of operations of the National
Postoffset by lower other operating costs at the Community Group as a result
of the sale of newspaper operations. Amortization increased year over year by
$6.2 million primarily as a result of increased amortization of intangibles
related to the acquisition of the remaining Southam shares in January 1999,
offset by reduced amortization at the Community Group as a result of the sale
of newspaper operations. Operating expenses included $22.0 million of
infrequent items in 1999, which consisted primarily of costs related to the
start-up of the new plant in Chicago and accounting adjustments related to
pension liabilities. Operating expenses included infrequent items of $26.2
million in 1998, which included $13.1 million of start-up costs relating to the
National Postand other one-time charges.

Other IncomeOther income of $326.3 million in 1999 consisted primarily
of gains on sales of newspaper operations at the Community Group and the gain
on the dilution of the Companys interest in Hollinger L.P. Other income of
$331.4 million in 1998 consisted primarily of the gains on sales of newspaper
operations at the Community Group and Canadian Newspaper Group.

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Interest ExpenseInterest expense increased 24.3% primarily due to
interest on additional debt incurred related to the acquisition of the Southam
minority in January 1999 and the repurchases in 1999 of the Companys common
stock.

Amortization of Debt Issue CostsAmortization of debt issue costs
represented debt issue costs on the Senior Notes, Senior Subordinated Notes and
the Bank Credit Facility. Amortization of debt issue costs in 1999 included
regular amortization of these costs and a one-time write-off of issue costs
related to debt incurred to buyout the Southam minority in January 1999.

Minority InterestMinority interest in 1999 represented the minority
interest in the earnings of Hollinger L.P. and in 1998 represented the minority
interest in earnings of Southam.

Chicago Group

Operating revenues for the Chicago Group were $390.5 million in 1999
compared with $379.1 million in 1998. Operating revenues for operations owned
in both years were $388.0 million in 1999 compared to $379.1 million in 1998.
The same store revenue growth was driven by a 3.7% increase in advertising
revenues primarily at the Chicago Sun-Timesoffset by a 2.8% reduction in
circulation revenue due to both price competition and lower circulation volume.

Total operating costs and expenses, excluding infrequent items, were
$345.2 million in 1999 compared with $345.0 million in 1998. Operating income
was $45.2 million in 1999 compared with $34.1 million in 1998. This
improvement was driven by increased advertising revenue and a newsprint price
improvement year over year of 9.8% across the group. For newspapers owned in
both years EBITDA increased 19.1% to $64.8 million in 1999 from $54.4 million
in 1998 and operating income increased 33.1% to $45.4 million from $34.1
million in 1998.

Community Group

Operating revenues for the Community Group were $96.7 million in 1999
compared with $210.1 million in 1998. The decrease in operating revenue was
the result of the sale of newspaper operations in 1999. Operating revenues for
newspapers owned in both years were $50.7 million in 1999 compared with $50.1
million in 1998; EBITDA was $14.3 million in 1999 compared with $13.4 million
in 1998 and operating income was $9.6 million in 1999 compared with $8.0
million in 1998. This improvement in operating income and EBITDA resulted from
a slight improvement in operating revenue as well as 10.5% year over year
reduction in newsprint prices. Newspaper operations sold contributed $17.3
million in operating revenue in 1999 and $139.2 million in 1998.

U.K. Newspaper Group

Operating revenues for the U.K. Newspaper Group were flat year over year.
However, when expressed in British pounds sterling, total operating revenues
increased by 2.4% and advertising revenue increased 1.9%. Advertising revenues
continued to increase primarily a result of a continued buoyant advertising
market in all sectors except recruitment advertising. However, the slowdown in
recruitment classifieds was more than offset by growth in other classified
categories and display advertising. Also, recruitment advertising turned the
corner, showing a year over year increase of 3.0% for the fourth quarter of
1999. In British pounds sterling, circulation revenues were flat year over
year and other operating revenue in 1999 increased 33.6% over 1998. The
increases are primarily due to increased revenue from Telegraph Enterprises, a
division of Telegraph Group Limited, which used the Telegraph brand to
facilitate sales of goods and services to readers.

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Total operating costs and expenses, excluding infrequent items were $480.5
million in 1999 compared to $484.1 million in 1998. Newsprint expense was
$97.0 million in 1999 compared with $101.8 million in 1998, a decrease of $4.8
million. This reflects a 5.7% year over year price decrease offset in part by
a consumption increase. The newsprint price improvement, although less than
reported for United States properties, reflected the longer-term purchasing
methodology in the U.K. which usually caused a delay in realizing the effect of
newsprint changes and resulted in smaller price swings during periods of
increasing newsprint prices. Operating income, excluding infrequent items,
increased $3.5 million from 1998.

Canadian Newspaper Group

Operating revenues in the Canadian Newspaper Group were $1,109.8 million
in 1999 compared with $1,058.0 million in 1998, an increase of $51.8 million or
4.9%. Most of this increase resulted from revenues from the National Post, in
its first year of operation and 1999 revenues from operations acquired during
1998 offset by lower 1999 revenue resulting from operations which were sold in
1998. Revenues from newspapers owned in both years were $914.5 and $910.9
million in 1998.

Total operating costs and expenses excluding infrequent items were $999.6
million in 1999 compared with $888.6 million in 1998, an increase of $111.0
million. Newsprint prices decreased 9.9% year over year, but overall
consumption increased primarily as a result of the National Post. Total
newsprint expense decreased $7.7 million or 5.2% from 1998. Compensation costs
increased $14.5 million year over year almost entirely as a result of 1999
including a full year of costs related to National Post. Compensation costs
for newspapers owned in both years were virtually flat. Other operating costs
increased $82.7 million to $373.3 million in 1999 from $290.6 million in 1998.
The majority of this increase results from a full year of other operating costs
of the National Postand an increase in Internet expenses. EBITDA from
newspapers owned in both years was $217.8 million in 1999 compared with $215.0
million in 1998. The National Post1999 EBITDA loss was $44.3 million compared
with $7.2 million in 1998. In 1998 the National Postcommenced publication
October 27.

Depreciation in 1999 increased $8.0 million over 1998 as a result of fixed
asset additions and the National Post. Amortization increased $13.5 million
from $21.1 million in 1998 to $34.7 million in 1999 primarily due to the
additional amortization of intangible assets resulting from the 1998 and 1999
acquisitions of Southam shares.

Liquidity and Capital Resources

Working CapitalWorking capital consists of current assets less current
liabilities. Current assets were $486.3 million and $417.0 million at December
31, 2000 and 1999, respectively. Current liabilities, excluding debt
obligations, were $739.1 million and $489.4 million, respectively, at December
31, 2000 and 1999. The Companys consolidated working capital at December 31,
2000 and 1999, excluding debt obligations, were deficits of $252.8 million and
$72.4 million, respectively. The increase in working capital deficiency is
primarily due to the increased income taxes payable resulting from the sales of
properties. Income taxes have been provided on gains on sales of assets
computed on tax bases that result in higher gains for tax purposes than for
accounting purposes. Tax planning strategies have been and may be implemented
to defer and/or reduce these taxes but the effects of these strategies have not
been reflected in the accounts.

EBITDAEBITDA, which represents the Companys earnings before interest
expense, interest and dividend income, foreign currency gains and losses,
income taxes, depreciation and amortization, minority interest, equity in
earnings of affiliates, amortization of debt issue costs, certain other income
items and extraordinary items was $344.4 million in 2000, $338.2 million in
1999 and $396.9 million in 1998, respectively. The Company believes that
EBITDA largely determines its ability to fund current operations and to service
debt. EBITDA excluding infrequent items and stock-based compensation was
$353.9 million, $360.3 million and $423.1 million in 2000, 1999 and 1998,
respectively.

Cash FlowCash flows on a consolidated basis from operating activities
were $59.8 million, $106.2 million and $53.7 million in 2000, 1999 and 1998,
respectively.

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Cash flows provided by investing activities were $1,080.8 million in 2000
principally reflecting the proceeds on disposal of investments, the proceeds on
disposal of newspaper properties at the Community Group and to CanWest, offset
in part, by the acquisition cost of newspapers in the Chicago suburbs. Cash
flows used in investing activities in 1999 were $59.6 million principally
reflecting the capital expenditures at the Chicago Group for the new production
facility, acquisition of the remaining minority of Southam and Internet related
spending, offset in part, by proceeds from the disposition of certain U.S.
community newspapers. Cash flows used in investing activities were $92.3
million in 1998 principally reflecting the acquisitions of the additional
interest in Southam, capital expenditures at the Chicago Group for the new
production facility, offset, in part, by net proceeds from dispositions of
certain newspapers at the Community Group and the Canadian Newspaper Group.

Cash flows used in financing activities in 2000 were $1,040.2 million
primarily reflecting the repayment of debt, the redemption of HCPH Special
shares and dividend payments. Cash flows used in financing activities in 1999
were $91.0 million, principally reflecting the payment by Southam of a special
dividend, the repurchase of Class A Common Stock by the Company offset, in
part, by the issuance of partnership units by Hollinger L.P. Cash flows used
in financing activities in 1998 were $15.8 million principally reflecting
changes in borrowings, dividend payments and repurchase of its own shares by
Southam.

Capital Expenditures and Acquisition FinancingIn the past three years
the Chicago Group, the Community Group, the U.K. Newspaper Group and the
Canadian Newspaper Group have funded their capital expenditures and acquisition
and investment activities out of cash provided by their respective operating
activities and borrowings under their bank credit facilities.

Capital expenditures at the Chicago Group amounted to $25.7 million, $40.9
million and $75.6 million in 2000, 1999 and 1998, respectively. The Company
began construction of a new printing facility in Chicago during 1998 which
become partially operational in 2000. The capital expenditures are primarily
related to the construction of this production facility. It is not expected
that significant further capital expenditures will be required at the new
production facility.

Capital expenditures at the Community Group amounted to $3.3 million, $4.9
million and $8.8 million in 2000, 1999 and 1998, respectively.

Capital expenditures at the Telegraph were $14.5 million, $5.6 million and
$7.1 million in 2000, 1999 and 1998, respectively.

Capital expenditures at the Canadian Newspaper Group were $28.8 million,
$72.4 million and $69.2 million in 2000, 1999 and 1998, respectively. The
capital expenditures in 1999 included new presses at Montreal, Saskatoon,
Regina and new equipment at the Vancouver press facility.

Debt ObligationsThe Company, Publishing and its principal subsidiaries
are parties to various debt agreements that have been entered into to fund
acquisitions, working capital requirements and other corporate purposes. At
December 31, 2000, the indebtedness of the Company was $812.2 million.

1997 Note OfferingOn March 4, 1997, Publishing filed both a Prospectus
and a Prospectus Supplement offering $200 million of Senior Notes due 2005 (the
Senior Notes) and $200 million of Senior Subordinated Notes due 2007 (the
Senior Subordinated Notes). On March 12, 1997, Publishing increased the size
of the offerings to $550.0 million, closing on March 18, 1997. Both the Senior
Notes and the Senior Subordinated Notes are guaranteed by the Company.

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The Senior Notes are unsecured and senior obligations of Publishing and
rank pari-passu with all other senior unsecured indebtedness of Publishing
including Publishings bank credit facilities, mature on March 15, 2005 and
bear interest at 8.625% per annum. The Senior Subordinated Notes are unsecured
senior subordinated obligations of Publishing and rank pari-passu with all
other senior subordinated indebtedness of Publishing including the existing
9.25% Senior Subordinated Notes due 2006. The Senior Subordinated Notes mature
on March 15, 2007 and bear interest payable semi-annually at a rate of 9.25%
per annum. The Indentures relating to the Senior Notes and the Senior
Subordinated Notes contain financial covenants and negative covenants that
limit Publishings ability to, among other things, incur indebtedness, pay
dividends or make other distributions on its capital stock. The Company is in
compliance with its covenants.

Publishing and its restricted subsidiaries utilized the proceeds of these
offerings to repay bank indebtedness, to repay the redeemable preference shares
of DTH and FDTH and for general working capital.

1996 Note OfferingPublishing sold $250 million aggregate principal
amount of Notes (the Notes) on February 7, 1996. The Notes mature on
February 1, 2006, and are unsecured senior subordinated obligations of
Publishing. Each Note bears interest at the rate of 9.25% per annum payable
semi-annually on February 1 and August 1 of each year, which commenced on August 1, 1996. The Notes may be redeemed at any time on or after February 1, 2001,
at the option of Publishing, in whole or in part, at a price of 104.625% of the
principal amount thereof, declining ratably to par on or after February 1,
2004, together with accrued and unpaid interest to the redemption date.
Payment of the principal, premium, and interest on the Notes is guaranteed by
the Company on a senior subordinated basis (the Guarantee). The Notes and
the Guarantee are expressly subordinated to all senior indebtedness of
Publishing and the Company, including all indebtedness and other obligations
under the Publishing Credit Facility and the Companys guarantee thereof.

The indenture relating to the Notes (the Indenture) contains covenants
that, among other things, limit the ability of Publishing and the Restricted
Subsidiaries (defined to include the United States subsidiaries of Publishing,
the Telegraph, the Canadian Newspapers and Jerusalem Post) to incur
indebtedness, pay dividends or make other distributions on its capital stock,
subject in each case to certain exceptions. The Company is in compliance with
the covenants.

Consent SolicitationOn February 19, 1997, Publishing completed a
solicitation of consents from the holders of the 9.25% Notes with respect to
certain amendments (the Amendments) to the Indenture governing the 9.25%
Notes dated as of February 1, 1996 between Publishing and Fleet National Bank,
as trustee (the Trustee). The primary purpose of the Amendments was to
facilitate the inclusion of certain international subsidiaries of the Company
as Restricted Subsidiaries of Publishing and to enhance its corporate and
financing flexibility.

During 1999, the Company solicited consents from the registered holders of
the Notes, Senior Notes and Senior Subordinated Notes to amend the indentures
covering said notes to (i) make the limitation on restricted payments covenant
less restrictive, (ii) make the consolidated cash flow ratio under the
limitation on indebtedness covenant more restrictive, and (iii) make the
limitation on sale of assets covenant less restrictive. The requisite consents
were obtained in March 1999 and the indentures governing the Notes, Senior
Notes and Senior Subordinated Notes were so amended.

Bank Credit FacilityOn April 30, 1999, Publishing, HCPH, Telegraph,
Southam, HIF and a group of financial institutions entered into a Fourth
Amended and Restated Credit Facility (Restated Credit Facility) for a total
of $725.0 million consisting of a $475.0 million revolving credit line maturing
on September 30, 2004 and a $250.0 million term loan maturing on December 31,
2004. This facility replaced the previous Bank Credit Facility. The Loans
under the Restated Credit Facility bear interest, at the option of the
respective borrower, at a rate per annum tied to specified floating rates or a
reserve adjusted Eurocurrency rate, in each case plus a specified margin
determined based on leverage ratios. On June 4, 1999, the revolving credit
line was increased by $50.0 million. On September 30, 1999, the Restated
Credit Facility was increased to $875.0 million when the revolving credit line
and the term loan were each increased by $50.0 million.

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In June 2000, Publishing, HCPH, Telegraph, Southam, HIF and a group of
financial institutions increased the term loan component of the Restated Credit
Facility by $100.0 million to $975.0 million. On November 16, 2000, using the
proceeds from the CanWest transaction, $972.0 million of borrowings were repaid
and the Restated Credit Facility was reduced to $5.0 million.

Subsequent to December 31, 2000, the Company entered into a new credit
facility in the amount of $120.0 million of which $53.0 million had been drawn
by February 23, 2001. This facility matures September 30, 2001.

Redeemable Preferred StockThe Company issued to Hollinger Inc. in
connection with the 1995 Reorganization in which the Company acquired Hollinger
Inc.s interest in The Telegraph and Southam, 739,500 shares of Series A
Preferred Stock. The Series A Preferred Stock was subsequently exchanged for
Series D Preferred Stock. During 1998, 408,551 shares of Series D Preferred
Stock were converted into 2,795,165 shares of Class A Common Stock. In
February 1999, 196,823 shares of Series D Preferred Stock were redeemed for
cash of $19,362,000. In May 1999, the remaining 134,126 shares of Series D
Preferred Stock were converted into 134,126 shares of Series E Preferred Stock.
The shares of Series E Preferred Stock are redeemable in whole or in part, at
any time and from time to time, subject to restrictions in the Companys credit
facilities, by the Company or by a holder of such shares.

Total Return Equity SwapDuring 1998 and 1999, the Company entered into
an arrangement with four banks, pursuant to which the banks purchased a total
of 14,109,905 shares of the Companys Class A Common Stock at an average price
of $14.17. The Company had the option, quarterly, up to and including
September 30, 2000 to buy the shares from the banks at the same cost or to have
the banks resell those shares in the open market. The arrangement was extended
until June 30, 2001. In the event the banks resell the shares, any gain or
loss realized by the banks will be for the Companys account. Until the
Company purchases the shares, dividends paid on the shares belong to the
Company and the Company pays interest to the banks at the rate of LIBOR plus a
spread. If the Companys stock price falls below the average purchase price of
these shares, the Company is required to deposit cash or shares into an escrow
account as additional security. At December 31, 2000, 129,038 shares were
required to be deposited in the escrow account.

On November 16, 2000, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 00-19 which clarified the accounting for derivative financial
instruments indexed to, and potentially settled in a companys own stock, that
require a cash payment by the issuer upon the occurrence of future events
outside the control of the issuer. The EITF applies to new contracts entered
after September 30, 2000. Consequently the extension of the contracts on
October 1, 2000 is accounted for under EITF Issue No. 00-19. Accordingly,
effective October 1, 2000, the above contracts have been accounted for using
the asset and liability method. Since the contracts can require cash
settlement in some situations, the contracts must be accounted for on income
basis rather than equity. Regardless, the amount of cash required for
settlement does not change but any change in value of the Companys own shares
that could be used to settle the obligation gives rise to a gain or loss that
is recorded in income. The derivative forward contract has been marked to
market for the period October 1 to December 31, 2000. The $35,314,000 gain
inherent in the old contracts at October 1, 2000, net of previously deferred
costs associated with the old contracts, has been recorded as an adjustment to
additional paid in capital and the loss during the period October 1 to December
31, 2000, together with the interest paid to the banks, which together totals
$16,334,000 has been reported in earnings as Other income, net. Cash
dividends do not include dividends in respect of the shares purchased by the
banks.

The Class A Common Stock covered by the forward purchase option will be
marked to market in the future and any changes in value will be reflected in
earnings.

HCPH Special SharesHCPH issued 6,552,425 Cdn. $10 Non-Voting Special
shares in July 1997 for a total issue price of Cdn. $65.5 million ($47.6
million).

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On July 18, 1997 HCPH, the Company and Montreal Trust Company of Canada as
trustee, entered into an Exchange Indenture providing for the exchange of the
HCPH Special shares at the option of the holder (Optional Exchange) at any
time after December 23, 1997 but prior to June 26, 2000, into Class A Common
Stock of the Company based on an exchange ratio set out in the Exchange
Indenture.

On June 12, 2000, the Company exercised its option to pay cash on the
mandatory exchange of HCPH Special shares. Pursuant to the terms of the
indenture governing the Special shares, each Special share was exchanged for
$8.88 cash resulting in a payment in July 2000 to special shareholders of $58.2
million. This payment was $10.9 million in excess of the recorded amount and
this excess is presented as minority interest in the Statement of Operations.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133), which established accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133, as recently amended, is effective for the Companys fiscal year
ending December 31, 2001. Management has determined that the adoption of SFAS
No. 133 will not have a material effect on the Companys financial position or
results of operations.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

NewsprintNewsprint prices continued to fluctuate throughout 2000 and on
a consolidated basis newsprint expense amounted to $304.2 million ($310.9
million in 1999 and $343.8 million in 1998). Management believes that while
newsprint prices could continue to show significant price variations in the
future, prices in 2001 in North America are not expected to increase
significantly from current levels. In the United Kingdom it is expected that
newsprint prices, payable by the Company in 2001, which are subject to
longer-term contracts, will increase from the prices paid in 2000 because the
contracts in effect for much of 2000 were booked at prices that were well below
North American prices. Since the beginning of 2000 spot prices have increased
by as much as 20%. Operating divisions take steps to ensure that they have
sufficient supply of newsprint and have mitigated cost increases by adjusting
pagination and page sizes and printing and distributing practices. For the
Company and subsidiaries, total newsprint usage in 2000 was about 572,000
tonnes. At those levels of usage and ownership levels at December 31, 2000, a
change in the price of newsprint of $50 per tonne would increase or decrease
net income by about $17.0 million.

InflationDuring the past three years, inflation has not had a material
effect on the Companys newspaper business in the United States, United Kingdom
and Canada.

Interest RatesAt December 31, 2000, the Company has no debt on which interest
is calculated at floating rates.

Foreign Exchange RatesA substantial portion of the Companys income is
earned outside of the United States in currencies other than the United States
dollar. As a result, the Companys income is vulnerable to changes in the
value of the United States dollar. Increases in the value of the United States
dollar can reduce net earnings and declines can result in increased earnings.
Based on 2000 earnings and ownership levels, a $0.05 change in the important
foreign currencies would have the following effect on the Companys reported
earnings:

|               |  |              |             |                   |  |   |           | 
|-------------- |  | ------------ | ----------- | ----------------- |  | - | --------- | 
|               |  | Actual 2000 
|               |  | Average Rate |             | Increase/Decrease
|               |  |              |             |                   | 
|United Kingdom |  | $            | 1.52/£      |                   |  | $ | 1,069,000 | 
|              
|              
|              
|              
|Canada         |  | $            | 0.67/Cdn. $ |                   |  | $ | 9,547,000 | 
|               |  |              |             |                   | 

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As a result of the sale of Canadian properties to CanWest in November
2000, the Company will be significantly less vulnerable to changes in the value
of the Canadian dollar compared with the United States dollar.

Electronic MediaManagement continues to hold the view that newspapers
will continue to be an important business segment. Among educated and affluent
people, indications are that strong newspaper readership will continue.
Alternate forms of information delivery such as the Internet could impact
newspapers, but recognition of the Internets potential combined with a strong
newspaper franchise could be a platform for Internet operations. Newspaper
readers can be offered a range of Internet services as varied as the content.
Virtually all newspapers are now published on the Internet as well as in the
traditional newsprint format.

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Item 8. Financial Statements and Supplementary Data

The information required by this item appears beginning at page F-1 of
this Form 10-K.

Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

Not applicable.

- 37 -



---



PART III

Item 10. Directors and Executive Officers of
the Registrant

The information required by this item is incorporated by reference to the
Companys Proxy Statement for the 2001 Annual Meeting of Stockholders.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to the
Companys Proxy Statement for the 2001 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is incorporated by reference to the
Companys Proxy Statement for the 2001 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

The information required by this item is incorporated by reference to the
Companys Proxy Statement for the 2001 Annual Meeting of Stockholders.

- 38 -



---



PART IV

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K

(a) Documents filed as part of this
report.

(1) Financial Statements and Supplemental Schedules.

The consolidated financial statements filed as part of this report
appear beginning at page F-1.

(2) Exhibits.

|            |  |                                                                                    |  |                                                                                              
|----------- |  | ---------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|            |  |                                                                                    |  | Prior Filing or                                                                              
|Exhibit No. |  | Description of Exhibit                                                             |  | Sequential Page Number                                                                       
|            |  |                                                                                    |  |                                                                                              
|2.4         |  | Purchase Agreement relating to the
Senior Notes, dated March 12, 1997              |  | Incorporated by
reference to Exhibit
1.01 to Current
Report on Form 8-K
dated March 18, 1997.
|           
|           
|           
|           
|           
|2.5         |  | Purchase Agreement relating to the
Senior Subordinated Notes, dated
March 12, 1997 |  | Incorporated by
reference to Exhibit
1.02 to Current
Report on Form 8-K
dated March 18, 1997.
|           
|           
|           
|           
|           
|3.1         |  | Restated Certificate of Incorporation                                              |  | Incorporated by
reference to Exhibit
3.1 to Current Report
on Form 8-K dated
October 13, 1995
|           
|           
|           
|           
|           
|3.2         |  | Bylaws, as amended and restated.                                                   |  | Incorporated by
reference to Exhibit
3.2 to Registration
Statement on Form S-1
(No. 33-74980)
|           
|           
|           
|           
|           
|3.3         |  | Certificate of Designations for
Series B Convertible Preferred Stock               |  | Incorporated by
reference to Exhibit
3.01 to Current
Report on Form 8-K
dated August 7, 1996.

- 39 -



---



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Prior Filing or                                                                                                                           
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Sequential Page Number                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                           
|3.4         |  | Certificate of Designations for Series C
Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                               |  | Incorporated by
reference to Exhibit
1.1.3.2 to Current
Report on Form 8-K
dated May 5, 1997.                                             
|           
|           
|           
|           
|           
|4.1         |  | Fourth Amended and Restated Credit
Agreement dated April 30, 1999 among
Hollinger International Publishing Inc.,
Telegraph Group Limited, Hollinger Canadian
Publishing Holdings Inc., Southam Inc., HIF
Inc., various financial institutions, The
Toronto Dominion Bank, as Issuing Bank, the
Bank of Nova Scotia, as Syndication Agent,
Canadian Imperial Bank of Commerce, as
Documentation Agent, and Toronto Dominion
(Texas), Inc., as Administrative Agent. |  | Pursuant to S-K
601(b)(4)(iii), the
Registrant has not
filed a copy of this
exhibit but will
furnish a copy upon
the Commissions
request.
|           
|           
|           
|           
|           
|4.2         |  | Senior Indenture, dated as of March 18, 1997                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Incorporated by
reference to Exhibit
4.01 to Current
Report on Form 8-K
dated March 18, 1997                                              
|           
|           
|           
|           
|           
|4.3         |  | Senior Subordinated Indenture, dated as of
March 18, 1997.                                                                                                                                                                                                                                                                                                                                                                                                         |  | Incorporated by
reference to Exhibit
4.03 to Current
Report on Form 8-K
dated March 18, 1997                                              
|           
|           
|           
|           
|           
|4.4         |  | Exchange Indenture, dated July 17, 1997,
among Hollinger Canadian Publishing
Holdings Inc., Hollinger International Inc.
and Montreal Trust Company of Canada.                                                                                                                                                                                                                                                                                                     |  | Incorporated by
reference to Exhibit
4.01 to Registration
Statement on Form S-3
(No. 333-35619)                                           
|           
|           
|           
|           
|           
|4.5         |  | Indenture dated as of February 7, 1996
among Hollinger International Publishing
Inc., Hollinger International Inc. and
Fleet National Bank of Connecticut as
Trustee.                                                                                                                                                                                                                                                                                              |  | Incorporated by
reference to Exhibit
10.4 to Current
Report on Form 8-K
Dated February 7,
1996                                            

- 40 -



---



|            |  |                                                                                                           |  |                                                                                                       
|----------- |  | --------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------
|            |  |                                                                                                           |  | Prior Filing or                                                                                       
|Exhibit No. |  | Description of Exhibit                                                                                    |  | Sequential Page Number                                                                                
|            |  |                                                                                                           |  |                                                                                                       
|10.4        |  | American Publishing Company 1994 Stock Option Plan.                                                       |  | Incorporated by
reference to Exhibit
10.10 to Registration
Statement on Form S-1
(No. 33-74980)       
|           
|           
|           
|           
|           
|10.5        |  | Hollinger International Inc. 1997 Stock Incentive Plan.                                                   |  | Incorporated by
reference to Annex A
to Report on Form DEF
14A dated March 28,
1997                   
|           
|           
|           
|           
|           
|10.12       |  | Hollinger International Inc. 1999 Stock Incentive Plan.                                                   |  | Incorporated by
reference to Annex A
to Report on Form DEF
14A dated March 24,
1999                   
|           
|           
|           
|           
|           
|10.15       |  | CanWest Transaction Agreement dated July 30, 2000 and Amending
Agreement thereto dated November 15, 2000. |  | Incorporated by
reference to Exhibit
2.1 and 2.2 to Current
Report on Form 8-K
Dated December 1, 2000.

- 41 -



---



|            |  |                                                          |  |                       
|----------- |  | -------------------------------------------------------- |  | ----------------------
|            |  |                                                          |  | Prior Filing or       
|Exhibit No. |  | Description of Exhibit                                   |  | Sequential Page Number
|            |  |                                                          |  |                       
|21.1        |  | Significant Subsidiaries of Hollinger International Inc. |  |                       
|           
|           
|           
|           
|23.1        |  | Consent of KPMG LLP.                                    

(b) Reports on Form 8-K.

The Company
filed a report on Form 8-K on December 1, 2000 under
Items 2 and 7 to report a disposition of assets which took place
effective November 16, 2000.

The Company filed a report on Form 8-K on
August 16, 2000 under Item 5 to report an event dated
July 31, 2000.

- 42 -



---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: March 30, 2001

|                                                     
|-----------------------------------------------------
|HOLLINGER INTERNATIONAL INC.
(Registrant)            
|                                                     
|By:   /s/ Conrad M. Black                            
|                                                     
|Conrad M. Black, Chairman
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.

|                                              |  |                                                                              |  |               
|--------------------------------------------- |  | ---------------------------------------------------------------------------- |  | --------------
|Signature                                     |  | Title                                                                        |  | Date          
|                                              |  |                                                                              |  |               
|/s/ Conrad M. Black
Conrad M. Black           |  | Chairman, Chief Executive
Officer and Director
(Principal Executive Officer) |  | March 30, 2001
|                                             
|/s/ John  A Boultbee
John  A Boultbee         |  | Executive Vice President
(Principal Financial Officer)                       |  | March 30, 2001
|                                             
|/s/ Frederick A. Creasey
Frederick A. Creasey |  | Group Corporate Controller
(Principal Accounting Officer)                    |  | March 30, 2001
|                                             
|/s/ F. David  Radler
F. David Radler          |  | Deputy Chairman, President,
Chief Operating Officer and
Director             |  | March 30, 2001
|                                             
|/s/ Daniel W. Colson
Daniel W. Colson         |  | Vice Chairman and Director                                                   |  | March 30, 2001
|                                             
|/s/ Barbara Amiel Black
Barbara Amiel Black   |  | Vice President - Editorial
and Director                                      |  | March 30, 2001

-43-



---



|                                          |  |          |  |               
|----------------------------------------- |  | -------- |  | --------------
|Signature                                 |  | Title    |  | Date          
|                                          |  |          |  |               
|/s/ Dwayne O. Andreas
Dwayne O. Andreas   |  | Director |  | March 30, 2001
|                                         
|/s/ Richard R. Burt
Richard R. Burt       |  | Director |  | March 30, 2001
|                                         
|/s/
Raymond G. Chambers                   |  | Director |  | March 30, 2001
|                                         
|/s/ Henry A. Kissinger
Henry A. Kissinger |  | Director |  | March 30, 2001
|                                         
|/s/ Marie-Josee Kravis
Marie-Josee Kravis |  | Director |  | March 30, 2001
|                                         
|/s/ Shmuel Meitar
Shmuel Meitar           |  | Director |  | March 30, 2001
|                                         
|/s/ Richard N. Perle
Richard N. Perle     |  | Director |  | March 30, 2001
|                                         
|/s/ Robert S. Strauss
Robert S. Strauss   |  | Director |  | March 30, 2001
|                                         
|/s/
A. Alfred Taubman                     |  | Director |  | March 30, 2001
|                                         
|/s/ James R. Thompson
James R. Thompson   |  | Director |  | March 30, 2001
|                                         
|/s/ Lord Weidenfeld
Lord Weidenfeld       |  | Director |  | March 30, 2001
|                                         
|/s/ Leslie H. Wexner
Leslie H. Wexner     |  | Director |  | March 30, 2001

-44-



---



Independent Auditors Report

To the Board of Directors of
Hollinger International Inc.:

We have audited the accompanying consolidated balance sheets of
Hollinger International Inc. and subsidiaries as of December 31, 2000
and 1999, and the related consolidated statements of operations,
comprehensive income, stockholders equity, and cash flows for each
of the years in the three-year period ended December 31, 2000. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Hollinger International Inc. and subsidiaries as of
December 31, 2000 and 1999, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

KPMG LLP

February 23, 2001

Chicago, Illinois

F-1



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Statement of Significant Accounting Policies
December 31, 2000 and 1999

1. Principles of Presentation and Consolidation

Hollinger International Inc. (the Company) is a subsidiary of Hollinger
Inc., a Canadian corporation. At December 31, 2000, Hollinger Inc. owned
37.0% of the combined equity and 73.3% of the combined voting power of
the outstanding Common Stock of the Company, without giving effect to
conversion of the Series C Convertible Preferred Stock (Series C
Preferred Stock) or Series E Redeemable Convertible Preferred Stock
(Series E Preferred Stock).

The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries and other controlled entities. The
Companys interest in XSTM Holdings (2000) Inc. (formerly Southam Inc.)
(Southam) was 100.0%, 100.0% and 71.0% at December 31, 2000, 1999 and
1998, respectively. The Companys interest in Hollinger Canadian
Newspapers, Limited Partnership (Hollinger L.P.) was 87.0% and 85.0% at
December 31, 2000 and 1999, respectively (see Note 1 of Notes to
Consolidated Financial Statements for discussion of partnership
formation). The Companys interest in The National Post Company
(National Post) was 50%, 100% and 100% at December 31, 2000, 1999 and
1998, respectively. All significant intercompany balances and
transactions have been eliminated on consolidation.

2. Description of Business

The Company is engaged in the publishing, printing and distribution of
newspapers and magazines through subsidiaries and affiliates primarily in
the United States, the United Kingdom, Canada and Israel. In addition,
the Company has developed a strategic online new media presence. The
Companys raw materials, mainly newsprint and ink, are not dependent on a
single or limited number of suppliers. Customers range from individual
subscribers to local and national advertisers.

3. Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

4. Cash Equivalents

Cash equivalents consist of certain highly liquid investments with
original maturities of three months or less.

F-2



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Statement of Significant Accounting Policies, Continued
December 31, 2000 and 1999

5. Inventories

Inventories consist principally of newsprint that is valued at the lower
of cost or net realizable value. Cost is determined using the first-in,
first-out (FIFO) method, except for newsprint inventories of certain
subsidiaries which are accounted for using the last-in, first-out method
(LIFO). At December 31, 2000 and December 31, 1999, approximately 48.6%
and 18%, respectively, of the Companys newsprint inventories were valued
using LIFO. If the FIFO method had been used, such newsprint inventories
would have been increased by $581,000 and $1,336,000, respectively.

6. Impairment of Long-Lived Assets

The Company assesses the recoverability of its long-lived assets, such as
property, plant and equipment and intangible assets, whenever events or
changes in business circumstances indicate the carrying amount of the
assets, or related group of assets, may not be fully recoverable. The
assessment of recoverability is based on managements estimate of
undiscounted future operating cash flows of its long-lived assets. If
the assessment indicates that the undiscounted operating cash flows do
not exceed the net book value of the long-lived assets, then a permanent
impairment has occurred. The Company would record the difference between
the net book value of the long-lived asset and the fair value of such
asset as a charge against income in the statement of operations if such a
difference arose. The Company determined that no material permanent
impairments had occurred at December 31, 2000.

7. Derivatives

The Company is a limited user of derivative financial instruments to
manage risks generally associated with interest rate market volatility.
The Company does not hold or issue derivative financial instruments for
trading purposes. Amounts receivable under interest rate cap agreements
are accrued as a reduction of interest expense and amounts payable are
accrued as interest expense. Interest rate differentials on all other
swap arrangements are accrued as interest rates change over the contract
periods.

8. Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Routine maintenance
and repairs are expensed as incurred. Depreciation is calculated under
the straight-line method over the estimated useful lives of the assets,
principally 25 to 40 years for buildings and improvements and 3 to 10
years for machinery and equipment. Leasehold improvements are amortized
using the straight-line method over the shorter of the estimated useful
life of the asset and the lease term. Construction in progress for
production facilities is not depreciated until facilities are in use.

F-3



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Statement of Significant Accounting Policies, Continued
December 31, 2000 and 1999

9. Investments

Investments consist of corporate debt and equity securities. The Company
has classified all of its debt and marketable equity securities as
available-for-sale, which are recorded at fair value. Unrealized holding
gains and losses, net of the related tax and minority interest effect, on
available-for-sale securities are excluded from earnings and are reported
as a separate component of other comprehensive income until realized.
Realized gains and losses from the sale of available-for-sale securities
are determined on a specific identification basis.

A decline in the market value of any available-for-sale security below
cost that is deemed to be other than temporary results in a reduction in
carrying amount to fair value. The impairment is charged to earnings and
a new cost basis for the security is established. Dividend and interest
income are recognized when earned.

10. Investments in Affiliated Companies

Investments in the common stock of affiliated companies are accounted for
by the equity method. The excess of cost of investment over the
Companys share of their net assets at the acquisition date is being
amortized on a straight-line basis over five years.

11. Intangible Assets

Intangible assets consist principally of circulation-related assets,
non-competition agreements with former owners of acquired newspapers and
the excess of acquisition costs over estimated fair value of net assets
acquired (goodwill). The fair market value of intangible assets
purchased is determined primarily through the use of independent
appraisals. Amortization is calculated using the straight-line method
over the respective estimated useful lives to a maximum of 40 years.

12. Deferred Financing Costs

Deferred financing costs consist of certain costs incurred in connection
with debt financing. Such costs are amortized on a straight-line basis
over the remaining term of the related debt, up to 10 years.

13. Deferred Revenue

Deferred revenue represents subscription payments that have not been
earned and are recognized on a straight-line basis over the term of the
related subscription.

F-4



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Statement of Significant Accounting Policies, Continued
December 31, 2000 and 1999

14. Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.

15. Foreign Currency Translation

Foreign operations of the Company have been translated into U.S. dollars
in accordance with the principles prescribed in Statement of Financial
Accounting Standards No. 52, Foreign Currency Translation. All assets,
liabilities and minority interests are translated at year-end exchange
rates, stockholders equity is translated at historical rates, and
revenues and expenses are translated at the average rates of exchange
prevailing throughout the year. Translation adjustments are included in
the accumulated other comprehensive income component of stockholders
equity. Translation adjustments are not included in earnings unless they
are actually realized through a sale or upon complete or substantially
complete liquidation of the Companys net investment in the foreign
subsidiary. Gains and losses arising from the Companys foreign currency
transactions are reflected in net earnings.

16. Earnings Per Share

Earnings per share is computed in accordance with Statement of Financial
Accounting Standards No. 128. See note 10 for a reconciliation of the
numerator and denominator for the calculation of basic and diluted
earnings per share.

17. Stock-Based Compensation

The Company utilizes the intrinsic value based method of accounting for
its stock-based compensation arrangements.

18. Reclassifications

Certain 1999 and 1998 amounts in the consolidated financial statements
have been reclassified to conform to the 2000 presentation.

F-5



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999

|                                                                                            |                                                                                                        |      |                |         |  |   |           |         | 
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---- | -------------- | ------- |  | - | --------- | ------- | 
|Assets                                                                                      |                                                                                                        | 2000 |                | 1999   
|                                                                                            |                                                                                                        |      |                |        
|                                                                                            |                                                                                                        |      | (in thousands)
|Current assets:                                                                            
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Cash and cash equivalents                                                                              |      | $              | 137,671 |  |   | $         | 39,903  | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Accounts receivable, net of allowance for doubtful accounts
of $16,925 in 2000
    and $23,346 in 1999 |      |                | 275,826 |  |   |           | 334,383 | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Due from affiliates                                                                                    |      |                | 39,692  |  |   |           |        | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Inventories                                                                                            |      |                | 21,834  |  |   |           | 28,217  | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Prepaid expenses and other current assets                                                              |      |                | 11,289  |  |   |           | 14,448  | 
|                                                                                            |                                                                                                        |      |                |         |  |   |           |        
|Total current assets                                                                        |                                                                                                        |      | 486,312        |         |  |   | 416,951   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investments (note 2)                                                                        |                                                                                                        |      | 899,078        |         |  |   | 208,166   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Property, plant and equipment, net of accumulated depreciation (note 3)                     |                                                                                                        |      | 360,596        |         |  |   | 711,627   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Intangible assets, net of accumulated amortization of $159,224 in 2000
and $230,479 in 1999 |                                                                                                        |      | 938,314        |         |  |   | 2,031,610 |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Deferred financing costs and other assets                                                   |                                                                                                        |      | 66,697         |         |  |   | 134,670   |        
|                                                                                            |                                                                                                        |      |                |         |  |   |           |        
|                                                                                            |                                                                                                        | $    | 2,750,997      |         |  | $ | 3,503,024 |        
|                                                                                            |                                                                                                        |      |                |         |  |   |           |        

(Continued)

F-6



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999

|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |          |         |  
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | --------- | -------------- | -------- | - | --------- | -------- | ------- | -
|Liabilities and Stockholders' Equity               |                                                                                                                                                               | 2000                                               |           | 1999          
|                                                   |                                                                                                                                                               |                                                    |           |               
|                                                   |                                                                                                                                                               |                                                    |           | (in thousands)
|Current liabilities:                              
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current installments of long-term debt (note 4)                                                                                                               |                                                    | $         | 4,753          |          |   | $         | 40,695   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts payable                                                                                                                                              |                                                    |           | 133,101        |          |   |           | 119,481  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued expenses                                                                                                                                              |                                                    |           | 159,280        |          |   |           | 229,110  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Income taxes payable                                                                                                                                          |                                                    |           | 386,678        |          |   |           | 61,259   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred revenue                                                                                                                                              |                                                    |           | 60,006         |          |   |           | 79,521   |        
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Total current liabilities                          |                                                                                                                                                               |                                                    | 743,818   |                |          |   | 530,066   |         
|                                                  
|                                                  
|                                                  
|                                                  
|Long-term debt, less current installments (note 4) |                                                                                                                                                               |                                                    | 807,495   |                |          |   | 1,613,241 |         
|                                                  
|                                                  
|                                                  
|                                                  
|Deferred income taxes (note 18)                    |                                                                                                                                                               |                                                    | 185,846   |                |          |   | 213,753   |         
|                                                  
|                                                  
|                                                  
|                                                  
|Other liabilities                                  |                                                                                                                                                               |                                                    | 54,325    |                |          |   | 74,247    |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Total liabilities                                  |                                                                                                                                                               |                                                    | 1,791,484 |                |          |   | 2,431,307 |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Minority interest (note 6)                         |                                                                                                                                                               |                                                    | 89,228    |                |          |   | 155,901   |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Redeemable preferred stock (note 7)                |                                                                                                                                                               |                                                    | 13,088    |                |          |   | 13,591    |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Stockholders equity (note 8):                    
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Convertible preferred stock                                                                                                                                   |                                                    |           |               |          |   |           | 6,377    |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Class A common stock, $0.01 par value. Authorized 250,000,000
shares; issued and outstanding 105,987,298 and 99,759,469 shares
in 2000 and 1999, respectively |                                                    |           | 1,060          |          |   |           | 998      |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Class B common stock, $0.01 par value. Authorized 50,000,000
shares; issued and outstanding 14,990,000 shares in 2000 and 1999                                |                                                    |           | 150            |          |   |           | 150      |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Additional paid-in capital                                                                                                                                    |                                                    |           | 748,503        |          |   |           | 652,705  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accumulated other comprehensive income:                                                                                                                      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                                                                               | Cumulative foreign currency translation adjustment |           |                | (111,970 | ) |           |          | (21,920 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                                                                               | Unrealized loss on marketable equity securities    |           |                | (49,580  | ) |           |          | (2,572  | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                                                                               | Minimum pension liability adjustment               |           |                | (2,094   | ) |           |          |        |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Retained earnings                                                                                                                                             |                                                    |           | 531,156        |          |   |           | 475,315  |        
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|                                                   |                                                                                                                                                               |                                                    | 1,117,225 |                |          |   | 1,111,053 |         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Class A common stock in treasury, at cost - 21,840,371 shares in 2000
and 11,962,462 shares in 1999                                                           |                                                    |           | (258,604       | )        |   |           | (147,955 | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Issued Class A common stock in escrow - 129,038 shares in
2000 and 4,846,370 shares in 1999 (note 11)                                                         |                                                    |           | (1,424         | )        |   |           | (60,873  | )      
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Total stockholders equity                         |                                                                                                                                                               |                                                    | 857,197   |                |          |   | 902,225   |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         
|Commitments and contingencies (note 16)            |                                                                                                                                                               | $                                                  | 2,750,997 |                |          | $ | 3,503,024 |         
|                                                   |                                                                                                                                                               |                                                    |           |                |          |   |           |         

See statement of significant accounting policies and accompanying notes to
consolidated financial statements.

F-7



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended December 31, 2000, 1999 and 1998

|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |           |  
|----------------------------------------------------------------------- | ------------------------------------ | - | ------------------------------------- | --------- | ---- | - | --------- | --------- | - | - | --------- | --------- | -
|                                                                        |                                      |   | 2000                                  |           | 1999 |   | 1998     
|                                                                        |                                      |   |                                       |           |      |   |          
|                                                                        |                                      |   | (in thousands, except per share data)
|Operating revenues:                                                    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Advertising                          |   | $                                     | 1,543,882 |      |   | $         | 1,557,033 |   |   | $         | 1,565,790 |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Circulation                          |   |                                       | 447,050   |      |   |           | 487,002   |   |   |           | 517,629   |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Job printing                         |   |                                       | 59,089    |      |   |           | 48,207    |   |   |           | 70,461    |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other                                |   |                                       | 45,998    |      |   |           | 55,160    |   |   |           | 43,880    |  
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Total operating revenues                                                |                                      |   | 2,096,019                             |           |      |   | 2,147,402 |           |   |   | 2,197,760 |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Operating costs and expenses:                                          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Newsprint                            |   |                                       | 304,177   |      |   |           | 310,850   |   |   |           | 343,809   |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Compensation costs                   |   |                                       | 662,351   |      |   |           | 684,365   |   |   |           | 699,126   |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Stock-based compensation             |   |                                       | 1,518     |      |   |           |          |   |   |           |          |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other operating costs                |   |                                       | 775,641   |      |   |           | 791,931   |   |   |           | 731,726   |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Infrequent items (note 12)           |   |                                       | 7,950     |      |   |           | 22,046    |   |   |           | 26,172    |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Depreciation                         |   |                                       | 64,546    |      |   |           | 64,153    |   |   |           | 59,842    |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Amortization                         |   |                                       | 58,088    |      |   |           | 61,255    |   |   |           | 55,006    |  
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Total operating costs and expenses                                      |                                      |   | 1,874,271                             |           |      |   | 1,934,600 |           |   |   | 1,915,681 |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Operating income                                                        |                                      |   | 221,748                               |           |      |   | 212,802   |           |   |   | 282,079   |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Other income (expense):                                                
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest expense                     |   |                                       | (142,713  | )    |   |           | (131,600  | ) |   |           | (105,841  | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Amortization of debt issue costs     |   |                                       | (10,469   | )    |   |           | (16,209   | ) |   |           | (5,869    | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest and dividend income         |   |                                       | 18,536    |      |   |           | 7,716     |   |   |           | 8,231     |  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Foreign currency gains (losses), net |   |                                       | (16,048   | )    |   |           | 13,774    |   |   |           | (3,336    | )
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other income, net (note 13)          |   |                                       | 478,011   |      |   |           | 326,343   |   |   |           | 331,376   |  
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Total other income (expense)                                            |                                      |   | 327,317                               |           |      |   | 200,024   |           |   |   | 224,561   |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Earnings before income taxes, minority interest and
extraordinary items |                                      |   | 549,065                               |           |      |   | 412,826   |           |   |   | 506,640   |          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income taxes (note 18)                                                  |                                      |   | 374,898                               |           |      |   | 155,203   |           |   |   | 223,099   |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Earnings before minority interest and extraordinary items               |                                      |   | 174,167                               |           |      |   | 257,623   |           |   |   | 283,541   |          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interest                                                       |                                      |   | 50,760                                |           |      |   | 7,088     |           |   |   | 81,562    |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Earnings before extraordinary items                                     |                                      |   | 123,407                               |           |      |   | 250,535   |           |   |   | 201,979   |          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Extraordinary loss on debt extinguishments (note 4(g))                  |                                      |   | (6,332                                | )         |      |   | (5,183    | )         |   |   | (5,067    | )        
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Net earnings                                                            |                                      | $ | 117,075                               |           |      | $ | 245,352   |           |   | $ | 196,912   |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Basic earnings per share before extraordinary items                     |                                      | $ | 1.16                                  |           |      | $ | 2.35      |           |   | $ | 1.70      |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Diluted earnings per share before extraordinary items                   |                                      | $ | 1.11                                  |           |      | $ | 2.13      |           |   | $ | 1.47      |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Basic earnings per share                                                |                                      | $ | 1.10                                  |           |      | $ | 2.30      |           |   | $ | 1.65      |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          
|Diluted earnings per share                                              |                                      | $ | 1.05                                  |           |      | $ | 2.09      |           |   | $ | 1.43      |          
|                                                                        |                                      |   |                                       |           |      |   |           |           |   |   |           |          

See statement of significant accounting policies and accompanying notes to
consolidated financial statements.

F-8



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2000, 1999 and 1998

|                            |                                                                                                                                                |   |         |         |   |      |         |                |   |   |         |         |   | 
|--------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | ------- | - | ---- | ------- | -------------- | - | - | ------- | ------- | - | 
|                            |                                                                                                                                                |   |         | 2000    |   | 1999 |         | 1998          
|                            |                                                                                                                                                |   |         |         |   |      |         |               
|                            |                                                                                                                                                |   |         |         |   |      |         | (in thousands)
|Net earnings                |                                                                                                                                                | $ | 117,075 |         |   | $    | 245,352 |                |   | $ | 196,912 |        
|                           
|                           
|                           
|                           
|Other comprehensive income:
|                           
|                           
|                           
|                           
|                            | Foreign currency translation adjustments                                                                                                       |   |         | (90,050 | ) |      |         | 43,879         |   |   |         | (37,821 | )
|                           
|                           
|                           
|                           
|                            | Unrealized loss on marketable equity securities, net of a related
tax benefit of $13,729 and minority interest of $2,522 (1999 and 1998 - nil) |   |         | (47,008 | ) |      |         | (2,572         | ) |   |         |        |  
|                           
|                           
|                           
|                           
|                            | Minimum pension liability adjustment                                                                                                           |   |         | (2,094  | ) |      |         |               |   |   |         |        |  
|                            |                                                                                                                                                |   |         |         |   |      |         |                |   |   |         |        
|Comprehensive income (loss) |                                                                                                                                                | $ | (22,077 | )       |   | $    | 286,659 |                |   | $ | 159,091 |        
|                            |                                                                                                                                                |   |         |         |   |      |         |                |   |   |         |        

See statement of significant accounting policies and accompanying notes to
consolidated financial statements.

F-9



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity
For the Years Ended December 31, 2000, 1999 and 1998

|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |       |   |         |   |  |   |          |   |  |   |         |   |  |   |          |   | 
|------------------------------------------------------ |  | - | ----------- | - | ----------- | - | ---------- |  | ------------- | - | -------- | - | -------- | - | -------------- | - | ----- | - | ------- | - |  | - | -------- | - |  | - | ------- | - |  | - | -------- | - | 
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   | Accumulated   
|                                                       |  |   | Convertible |   | Common      |   | Additional |  | other         |   |          |   |          |   |                |   |       |   | Issued 
|                                                       |  |   | preferred   |   | stock       |   | paid-in    |  | comprehensive |   | Retained |   | Treasury |   | shares        
|                                                       |  |   | stock       |   | Class A & B |   | capital    |  | income        |   | earnings |   | stock    |   | in escrow      |   | Total
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |      
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   | (in thousands)
|Balance at December 31, 1997                           |  | $ | 195,104     |   |             | $ | 876        |  |               | $ | 358,871  |   |          | $ | (27,978        | ) |       | $ | 175,802 |   |  | $ | (15,073  | ) |  | $ |        |   |  | $ | 687,602  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Stock option exercise                                  |  |   |            |   |             |   | 2          |  |               |   | 1,966    |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 1,968    |  
|                                                      
|                                                      
|                                                      
|                                                      
|Preferred stock conversion
to Class A
common stock     |  |   | (188,727    | ) |             |   | 186        |  |               |   | 188,541  |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   |         |  
|                                                      
|                                                      
|                                                      
|                                                      
|Series D conversion to Class A                         |  |   |            |   |             |   | 28         |  |               |   | 39,222   |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 39,250   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends  Class A and
Class B, $0.475 per share |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (46,985 | ) |  |   |         |   |  |   |        |   |  |   | (46,985  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on redeemable
preferred stock                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (736    | ) |  |   |         |   |  |   |        |   |  |   | (736     | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on convertible
preferred stock               |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (18,726 | ) |  |   |         |   |  |   |        |   |  |   | (18,726  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Deemed dividend                                        |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (5,134  | ) |  |   |         |   |  |   |        |   |  |   | (5,134   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Translation adjustments                                |  |   |            |   |             |   |           |  |               |   | 5,079    |   |          |   | (37,821        | ) |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (32,742  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Net earnings                                           |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | 196,912 |   |  |   |         |   |  |   |        |   |  |   | 196,912  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Interest on forward share purchase                     |  |   |            |   |             |   |           |  |               |   | (1,619   | ) |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (1,619   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Common shares repurchased                              |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   |        |   |  |   | (1,671   | ) |  |   |        |   |  |   | (1,671   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Escrow shares on total return equity swap              |  |   |            |   |             |   | 14         |  |               |   | 18,380   |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 18,394   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Shares issued in escrow                                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   | (18,592 | ) |  |   | (18,592  | )
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |       |   |         |   |  |   |          |   |  |   |         |   |  |   |          |  
|Balance at December 31, 1998                           |  |   | 6,377       |   |             |   | 1,106      |  |               |   | 610,440  |   |          |   | (65,799        | ) |       |   | 301,133 |   |  |   | (16,744  | ) |  |   | (18,592 | ) |  |   | 817,921  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Stock option exercise                                  |  |   |            |   |             |   | 1          |  |               |   | 1,303    |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 1,304    |  
|                                                      
|                                                      
|                                                      
|                                                      
|Share issue                                            |  |   |            |   |             |   |           |  |               |   | 92       |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 92       |  
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends  Class A and
Class B, $0.55 per share  |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (55,360 | ) |  |   |         |   |  |   |        |   |  |   | (55,360  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on redeemable preferred stock                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (262    | ) |  |   |         |   |  |   |        |   |  |   | (262     | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on convertible preferred stock               |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (9,221  | ) |  |   |         |   |  |   |        |   |  |   | (9,221   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Deemed dividend                                        |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (6,327  | ) |  |   |         |   |  |   |        |   |  |   | (6,327   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Translation adjustments                                |  |   |            |   |             |   |           |  |               |   | (1,420   | ) |          |   | 43,879         |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 42,459   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Unrealized loss on securities                          |  |   |            |   |             |   |           |  |               |   |         |   |          |   | (2,572         | ) |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (2,572   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Net earnings                                           |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | 245,352 |   |  |   |         |   |  |   |        |   |  |   | 245,352  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Interest on forward share purchase                     |  |   |            |   |             |   |           |  |               |   | (6,042   | ) |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (6,042   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Common shares repurchased                              |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   |        |   |  |   | (123,497 | ) |  |   |        |   |  |   | (123,497 | )
|                                                      
|                                                      
|                                                      
|                                                      
|Escrow shares on total return equity swap              |  |   |            |   |             |   | 41         |  |               |   | 48,332   |   |          |   |               |   |       |   |        |   |  |   | (7,714   | ) |  |   |        |   |  |   | 40,659   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Shares issued in escrow                                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   | (42,281 | ) |  |   | (42,281  | )
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |       |   |         |   |  |   |          |   |  |   |         |   |  |   |          |  
|Balance at December 31, 1999                           |  |   | 6,377       |   |             |   | 1,148      |  |               |   | 652,705  |   |          |   | (24,492        | ) |       |   | 475,315 |   |  |   | (147,955 | ) |  |   | (60,873 | ) |  |   | 902,225  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Stock option exercise                                  |  |   |            |   |             |   | 5          |  |               |   | 5,492    |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 5,497    |  
|                                                      
|                                                      
|                                                      
|                                                      
|Preferred stock conversion
to Class A
common stock     |  |   | (6,377      | ) |             |   | 6          |  |               |   | 6,346    |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (25      | )
|                                                      
|                                                      
|                                                      
|                                                      
|Stock-based compensation                               |  |   |            |   |             |   |           |  |               |   | 1,518    |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 1,518    |  
|                                                      
|                                                      
|                                                      
|                                                      
|Cash dividends  Class A and
Class B, $0.55 per share  |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (52,284 | ) |  |   |         |   |  |   |        |   |  |   | (52,284  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on redeemable preferred stock                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (519    | ) |  |   |         |   |  |   |        |   |  |   | (519     | )
|                                                      
|                                                      
|                                                      
|                                                      
|Dividends on convertible preferred stock               |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | (8,431  | ) |  |   |         |   |  |   |        |   |  |   | (8,431   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Minimum pension liability adjustment                   |  |   |            |   |             |   |           |  |               |   |         |   |          |   | (2,094         | ) |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (2,094   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Translation adjustments                                |  |   |            |   |             |   |           |  |               |   | 503      |   |          |   | (90,050        | ) |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (89,547  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Unrealized loss on securities, net                     |  |   |            |   |             |   |           |  |               |   |         |   |          |   | (47,008        | ) |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (47,008  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Net earnings                                           |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   | 117,075 |   |  |   |         |   |  |   |        |   |  |   | 117,075  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Interest on forward share purchase                     |  |   |            |   |             |   |           |  |               |   | (6,323   | ) |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | (6,323   | )
|                                                      
|                                                      
|                                                      
|                                                      
|Gain on total return equity swap (note 11)             |  |   |            |   |             |   |           |  |               |   | 35,314   |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   |        |   |  |   | 35,314   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Escrow shares on total return equity swap              |  |   |            |   |             |   | 51         |  |               |   | 52,948   |   |          |   |               |   |       |   |        |   |  |   | (110,649 | ) |  |   |        |   |  |   | (57,650  | )
|                                                      
|                                                      
|                                                      
|                                                      
|Shares issued in escrow                                |  |   |            |   |             |   |           |  |               |   |         |   |          |   |               |   |       |   |        |   |  |   |         |   |  |   | 59,449  |   |  |   | 59,449   |  
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |       |   |         |   |  |   |          |   |  |   |         |   |  |   |          |  
|Balance at December 31, 2000                           |  | $ |            |   |             | $ | 1,210      |  |               | $ | 748,503  |   |          | $ | (163,644       | ) |       | $ | 531,156 |   |  | $ | (258,604 | ) |  | $ | (1,424  | ) |  | $ | 857,197  |  
|                                                       |  |   |             |   |             |   |            |  |               |   |          |   |          |   |                |   |       |   |         |   |  |   |          |   |  |   |         |   |  |   |          |  

See statement of significant accounting policies and accompanying notes to
consolidated financial statements.

F-10



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2000, 1999 and 1998

|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |                |          |         |          |         |          |  
|----------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------------------ | --------- | ------- | -------- | ------- | -------- | -------------- | -------- | ------- | -------- | ------- | -------- | -
|                                                |                                                                                     |                                           |                                                                    |           | 2000    |          | 1999    |          | 1998          
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |               
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          | (in thousands)
|Cash flows from operating activities:          
|                                               
|                                               
|                                               
|                                               
|                                                | Net earnings                                                                        |                                           | $                                                                  | 117,075   |         |          | $       | 245,352  |                |          | $       | 196,912  |        
|                                               
|                                               
|                                               
|                                               
|                                                | Adjustments to reconcile net earnings to net cash provided by
operating activities:
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Depreciation and amortization                                      |           |         | 122,634  |         |          |                | 125,408  |         |          |         | 114,848  |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Deferred income taxes                                              |           |         | (27,907  | )       |          |                | 6,086    |         |          |         | 75,530   |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Amortization of debt issue costs                                   |           |         | 10,469   |         |          |                | 16,209   |         |          |         | 5,869    |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Minority interest                                                  |           |         | 50,760   |         |          |                | 7,088    |         |          |         | 81,562   |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Equity in loss (earnings) of affiliates, net of dividends received |           |         | 20,340   |         |          |                | 1,734    |         |          |         | (3,674   | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Gain on sales of investments                                       |           |         | (49,577  | )       |          |                |         |         |          |         |         |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Gain on sales of assets                                            |           |         | (492,459 | )       |          |                | (336,708 | )       |          |         | (363,074 | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Amortization of deferred gain                                      |           |         | (1,417   | )       |          |                | (1,616   | )       |          |         | (1,616   | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Write-off of investments                                           |           |         | 20,621   |         |          |                |         |         |          |         |         |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Total return equity swap                                           |           |         | 12,276   |         |          |                |         |         |          |         |         |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     |                                           | Other                                                              |           |         | 7,153    |         |          |                | (1,541   | )       |          |         | (2,228   | )
|                                               
|                                               
|                                               
|                                               
|                                                | Changes in assets and liabilities, net of acquisitions and dispositions:           
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Accounts receivable                       |                                                                    |           | (51,383 | )        |         |          | (17,922        | )        |         |          | (8,566  | )       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Inventories                               |                                                                    |           | (9,679  | )        |         |          | 3,224          |          |         |          | (662    | )       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Prepaid expenses and other current assets |                                                                    |           | 892     |          |         |          | 6,817          |          |         |          | (12,072 | )       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Accounts payable                          |                                                                    |           | 10,279  |          |         |          | (44,016        | )        |         |          | 38,809  |         
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Accrued expenses                          |                                                                    |           | (53,370 | )        |         |          | 48,259         |          |         |          | (38,064 | )       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Income taxes payable                      |                                                                    |           | 368,328 |          |         |          | 55,716         |          |         |          | (21,232 | )       
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                     | Deferred revenue and other                |                                                                    |           | 4,737   |          |         |          | (7,865         | )        |         |          | (8,604  | )       
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |                |          |         |         
|Cash provided by operating activities           |                                                                                     |                                           | 59,772                                                             |           |         |          | 106,225 |          |                |          | 53,738  |         
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |                |          |         |         
|Cash flows from investing activities:          
|                                               
|                                               
|                                               
|                                               
|                                                | Purchase of property, plant and equipment                                           |                                           |                                                                    | (74,024   | )       |          |         | (125,283 | )              |          |         | (163,997 | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from sale of property, plant and equipment                                 |                                           |                                                                    | 8,514     |         |          |         | 12,087   |                |          |         | 22,098   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Purchase of subsidiaries stock and other investments                               |                                           |                                                                    | (79,600   | )       |          |         | (441,689 | )              |          |         | (223,967 | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Acquisitions, net of cash acquired                                                  |                                           |                                                                    | (117,134  | )       |          |         | (28,659  | )              |          |         | (332,507 | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds on disposal of investments and assets                                      |                                           |                                                                    | 1,341,773 |         |          |         | 520,040  |                |          |         | 601,980  |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other                                                                               |                                           |                                                                    | 1,293     |         |          |         | 3,950    |                |          |         | 4,068    |        
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |                |          |         |         
|Cash provided by (used in) investing activities |                                                                                     | $                                         | 1,080,822                                                          |           |         | $        | (59,554 | )        |                | $        | (92,325 | )       
|                                                |                                                                                     |                                           |                                                                    |           |         |          |         |          |                |          |         |         

(Continued)

F-11



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
For the Years Ended December 31, 2000, 1999 and 1998

|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |          |  
|---------------------------------------------------- | ------------------------------------------------------------------------- | - | ---------- | ---------- | ---- | - | -------------- | ---------- | - | - | ------- | -------- | -
|                                                     |                                                                           |   | 2000       |            | 1999 |   | 1998          
|                                                     |                                                                           |   |            |            |      |   |               
|                                                     |                                                                           |   |            |            |      |   | (in thousands)
|Cash flows from financing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayment of debt                                                         |   | $          | (1,266,189 | )    |   | $              | (1,363,351 | ) |   | $       | (246,140 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of bank debt                                       |   |            | 450,539    |      |   |                | 1,476,323  |   |   |         | 349,513  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payment of debt issue costs                                               |   |            | (2,474     | )    |   |                | (37,964    | ) |   |         | (12,343  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Change in borrowings with affiliates                                      |   |            | (41,146    | )    |   |                | 12,334     |   |   |         | 5,247    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from issuance of equity                                      |   |            | 5,497      |      |   |                | 1,396      |   |   |         | 1,968    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common shares by a subsidiary                                 |   |            |           |      |   |                | 154,463    |   |   |         | 758      |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repurchase of common shares                                               |   |            |           |      |   |                | (123,497   | ) |   |         | (1,671   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repurchase of common shares by a subsidiary                               |   |            |           |      |   |                |           |   |   |         | (36,124  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Redemption of preference shares                                           |   |            |           |      |   |                | (19,362    | ) |   |         |         |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Redemption of Special shares                                              |   |            | (58,164    | )    |   |                |           |   |   |         |         |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                            |   |            | (61,234    | )    |   |                | (64,843    | ) |   |         | (66,447  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deemed dividend                                                           |   |            |           |      |   |                | (6,327     | ) |   |         | (5,134   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends and distributions paid by subsidiaries to
minority stockholders |   |            | (63,083    | )    |   |                | (112,539   | ) |   |         | (3,735   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                     |   |            | (3,977     | )    |   |                | (7,664     | ) |   |         | (1,667   | )
|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |         
|Cash used in financing activities                    |                                                                           |   | (1,040,231 | )          |      |   | (91,031        | )          |   |   | (15,775 | )       
|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |         
|Effect of exchange rate changes on cash              |                                                                           |   | (2,595     | )          |      |   | 26,475         |            |   |   | 4,766   |         
|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |         
|Net increase (decrease) in cash and cash equivalents |                                                                           |   | 97,768     |            |      |   | (17,885        | )          |   |   | (49,596 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of year       |                                                                           |   | 39,903     |            |      |   | 57,788         |            |   |   | 107,384 |         
|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |         
|Cash and cash equivalents at end of year             |                                                                           | $ | 137,671    |            |      | $ | 39,903         |            |   | $ | 57,788  |         
|                                                     |                                                                           |   |            |            |      |   |                |            |   |   |         |         

See statement of significant accounting policies and accompanying notes to
consolidated financial statements.

F-12



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(1) Acquisitions and Dispositions



| | (a) |  | On November 16, 2000, the Company and its affiliates, Southam and
Hollinger L.P. (Hollinger Group) completed the sale of most of its
Canadian newspapers and related assets to CanWest Global Communications
Corp. (CanWest). Included in the sale were the following assets of the
Hollinger Group:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a 50% interest in National Post, with the Company
continuing as managing partner;                                                                                                                                                                                                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the metropolitan and a large number of community
newspapers in Canada (including the Ottawa Citizen, The
Vancouver Sun, The Province(Vancouver), the Calgary Herald,
the Edmonton Journal, The Gazette,(Montreal), The Windsor
Star, the Regina Leader Post, the Star Phoenixand the
Times-Colonist(Victoria)); and
|
| |  |  | the operating Canadian Internet properties,
including canada.com.                                                                                                                                                                                                                                                  



| |  |  | The sale resulted in the Hollinger Group receiving approximately Cdn. $1.7
billion ($1.1 billion) cash, approximately Cdn. $425 million ($277
million) in voting and non-voting shares of CanWest at fair value
(representing an approximate 15.6% equity interest and 5.7% voting
interest) and subordinated non-convertible debentures of a holding company
in the CanWest group at fair value of approximately Cdn. $697 million
($456 million). The aggregate sale price of these properties at fair
value was approximately Cdn. $2.8 billion ($1.8 billion), plus closing
adjustments for working capital at August 31, 2000 and cash flow and
interest for the period September 1 to November 16, 2000 which in total
approximates an additional $40,700,000.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The sale resulted in a pre-tax gain of approximately $378,500,000. In
determining this gain, certain closing adjustments have not yet been
finalized.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | On November 1, 2000, Southam converted the convertible promissory note in
Hollinger L.P. in the principal amount of Cdn. $225,800,000
($147,900,000) into 22,575,324 limited partnership units of Hollinger
L.P., thereby increasing its interest in Hollinger L.P. to 87.0%.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (c) |  | During 2000, the Company sold most of its remaining U.S. community
newspaper properties, including 11 paid dailies, three paid non-dailies
and 31 free distribution publications for total proceeds of approximately
$215,000,000. Pre-tax gains totaling $91,200,000 were recognized on these
sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (d) |  | In December 2000, the Company acquired four paid daily newspapers, one
paid non-daily and 12 free distribution publications in the Chicago
suburbs for total purchase consideration of $111,000,000. The excess
purchase price of $84,650,000 over the estimated fair value of tangible
assets acquired was ascribed to intangible assets.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (e) |  | On February 17, 2000, Interactive Investor International, in which the
Company owned 51.7 million shares or a 47% equity interest, had its
initial public offering (IPO) issuing 52 million shares and raising £78
million ($125.8 million). The IPO reduced the Companys equity ownership
to 33% and resulted in a dilution gain of $17,008,000 for accounting
purposes. Subsequently, the Company sold five million shares of its
holding, reducing its equity interest to 28.5% and resulting in a pre-tax
gain of $1,600,000.                                                                                                                                                                                                                                                 
|
| | (f) |  | In April 1999, the Company formed Hollinger L.P. Hollinger L.P. acquired
48 daily newspapers, 180 non-daily newspapers and shopping guides and 106
magazines and specialty publications located across Canada from Southam,
UniMédia Inc. and Sterling Newspapers Company in exchange for promissory
notes due April 29, 2020 of $309,500,000 (Cdn. $451,200,000) and
135,945,972 units in Hollinger L.P. The transfer of properties to
Hollinger L.P. has been accounted for at historical carrying values and no
gain was recognized on the transfer.                                                                                                                                                                                                                              
|
| |     |  | A Cdn. $200,000,000 ($137,200,000) private placement was completed April 30,
1999 and private placement investors subsequently received 20,000,000
partnership units of Hollinger L.P. During July 1999, Hollinger L.P.
completed its initial public offering issuing 4,000,000 units at Cdn. $10 per
unit for total proceeds of Cdn. $40,000,000 ($27,000,000). All partnership
units, including the 20,000,000 units issued through the April 30, 1999
private placement, are listed on The Toronto Stock Exchange. As a result of
these investments by others in Hollinger L.P., the Company recognized in 1999
dilution gains of $77,297,000 recorded in other income (note 13). The
Companys indirect ownership in the equity of Hollinger L.P. was 85.0% at
December 31, 1999.

F-14



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (g) |  | In January 1999, Hollinger Canada Publishing Holdings Inc. (HCPH)
acquired 19,845,118 outstanding Southam common shares which had been tendered
pursuant to HCPHs offer to all Southam shareholders to acquire the shares
for Cdn. $25.25 cash per share after payment by Southam of a special dividend
of Cdn. $7.00 per share. The aggregate consideration paid was $327,500,000
and this purchase of shares brought HCPHs ownership interest in Southam to
approximately 97%. The remaining Southam common shares were purchased by
HCPH in February 1999 pursuant to applicable Canadian law for an aggregate
consideration of $36,500,000. Of the aggregate purchase price of these 1999
acquisitions, $329,700,000 was ascribed to intangible assets.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (h) |  | In February 1999, the Company completed the sale of 45 U.S. community
newspapers for proceeds of approximately $460,000,000 of which approximately
$441,000,000 was cash. The proceeds from the sale were used to pay down
outstanding debt of the Bank Credit Facility. The pre-tax gain of
approximately $249,171,000 resulting from this transaction was recorded in
other income.                                                                                                                                                                                                                                                                                                                                                                          
|
| | (i) |  | During 1999, the Company sold to Horizon Publications Inc. 33 U.S.
community newspapers for $43,700,000 resulting in a pre-tax gain of
approximately $20,672,000. Horizon Publications Inc. is managed by former
Community Group executives and owned by current and former Hollinger
International Inc. executives.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (j) |  | Throughout 1999, the Company acquired five community newspapers in the
U.S. for total consideration of $24,505,000. The excess purchase price of
$16,900,000 over the estimated fair value of tangible assets acquired was
ascribed to intangible assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (k) |  | In January 1998, the Company sold 80 community newspapers for total
proceeds of $310,000,000 resulting in a pre-tax gain of approximately
$201,245,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (l) |  | In May 1998, Southam sold American
Trucker magazine and related
publications and a paid daily circulation newspaper in Western Canada for
total proceeds of $93,672,000, resulting in a pre-tax gain of $56,058,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (m) |  | In July 1998, the Company acquired two community newspapers for a total
cash price of $41,800,000. The excess purchase price of $39,350,000 over the
estimated fair value of tangible assets acquired was ascribed to intangible
assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (n) |  | In August 1998, HCPH acquired 8,268,900 additional shares of Southam for
$168,620,000, increasing its ownership interest at that time to 69.1% from
58.6%. Subsequent to August 1998, Southam repurchased some of its own common
shares, increasing the Companys ownership interest to 71.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-15



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (o) |  | In September 1998, in two separate transactions Southam acquired 100% of
The Financial Post Company, which published The Financial Post, a daily
newspaper in Canada. In addition, in July 1998, Southam acquired the
Times-Colonist(Victoria) and the Nanaimo Daily Newsand certain community
newspapers on Vancouver Island in British Columbia, Canada. The total cost
of these acquisitions was $208,535,000. The excess purchase price of
$197,728,000 over the estimated fair value of tangible assets acquired was
ascribed to intangible assets.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | In a related transaction, in September 1998, Southam sold the Hamilton
Spectatorand The Record(Kitchener-Waterloo) and HCPH sold the Cambridge
Recordand the Guelph Mercuryfor total proceeds of $173,765,000 resulting in
a pre-tax gain of $105,771,000.                                                                                                                                                                                                                                                                                              
|
| |     |  | All of the above acquisitions are accounted for using the purchase method of
accounting. Based on estimated fair values of the acquired assets and
liabilities, the purchase price including direct costs is allocated to
working capital, property, plant and equipment, and intangible assets. The
results of the newspapers acquired are included in the consolidated results
of operations from the date of acquisition. The pro forma effect of the
above acquisitions is immaterial.                                                              

F-16



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(2) Investments

|                                                                                     |                                                       |   |                |         |      |   |         |        |  
|------------------------------------------------------------------------------------ | ----------------------------------------------------- | - | -------------- | ------- | ---- | - | ------- | ------ | -
|                                                                                     |                                                       |   | 2000           |         | 1999
|                                                                                     |                                                       |   |                |         |     
|                                                                                     |                                                       |   | (in thousands)
|Available-for-sale
securities, at fair value                                        
|                                                                                     | CanWest shares (a)                                    |   | $              | 368,188 |      |   | $       |       |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Internet related equity securities                    |   |                | 12,215  |      |   |         | 10,725 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | CanWest debentures (b)                                |   |                | 326,846 |      |   |         |       |  
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                     |                                                       |   | 707,249        |         |      |   | 10,725  |       
|                                                                                     |                                                       |   |                |         |      |   |         |       
|Other non-marketable
investments, at cost
      Internet related companies           |                                                       |   | 64,866         |         |      |   | 31,280  |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | 3396754 Canada Limited (note 6)                       |   |                |        |      |   |         | 28,710 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Notes receivable from joint ventures                  |   |                | 11,533  |      |   |         | 10,117 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Advances under printing contracts with joint ventures |   |                | 48,189  |      |   |         | 55,742 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Other                                                 |   |                | 24,154  |      |   |         | 30,587 |  
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                     |                                                       |   | 148,742        |         |      |   | 156,436 |       
|                                                                                     |                                                       |   |                |         |      |   |         |       
|Equity accounted companies, at
equity
      Printing joint ventures                  |                                                       |   | 28,067         |         |      |   | 22,753  |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Internet related companies                            |   |                | 14,198  |      |   |         | 16,685 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Other                                                 |   |                | 822     |      |   |         | 1,567  |  
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                     |                                                       |   | 43,087         |         |      |   | 41,005  |       
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                     |                                                       | $ | 899,078        |         |      | $ | 208,166 |       
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                    
|                                                                                     |                                                       |   | 2000           |         | 1999
|                                                                                     |                                                       |   |                |         |     
|                                                                                     |                                                       |   | (in thousands)
|Gross unrealized holding losses on
available-for-sale securities
     CanWest shares |                                                       | $ | (64,150        | )       |      | $ |        |       
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Internet related equity securities                    |   |                | (1,681  | )    |   |         | (2,572 | )
|                                                                                     |                                                       |   |                |         |      |   |         |       
|                                                                                     |                                                       | $ | (65,831        | )       |      | $ | (2,572  | )     
|                                                                                     |                                                       |   |                |         |      |   |         |       

F-17



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (a) |  | CanWest shares consist of 2,700,000 multiple voting preferred
shares and 27,000,000 non-voting shares each of CanWest. The
non-voting shares are publicly-traded and the multiple voting shares
are not publicly-traded but are convertible into non-voting shares at
the rate of 0.15 non-voting share for each voting preferred share or
a total additional 405,000 non-voting shares. The non-voting shares
and voting preferred shares represent an approximate 15.6% equity
interest and 5.7% voting interest in CanWest.                                                                                                                                                                                                                                                                                            
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The CanWest debentures have a principal amount of Cdn. $767
million ($493 million) representing part of the proceeds for the sale
of properties to CanWest of Cdn. $750 million ($482 million) and
interest accrued from August 31, 2000 to November 16, 2000 of Cdn.
$17 million ($11 million). Interest is calculated, compounded and
payable semi-annually in arrears at a rate of 12.125% per annum. At
any time prior to November 5, 2005 CanWest may elect to pay interest
on the debentures by way of non-voting shares of CanWest, debentures
in substantially the same form as CanWest debentures, or cash.
Subsequent to November 5, 2005 interest shall be paid in cash. The
debentures may not be transferred by the Company to third parties
prior to May 15, 2003. The debentures are due November 15, 2010.

(3) Property, Plant and Equipment

|                                               |  |                |         |      |  |   |           | 
|---------------------------------------------- |  | -------------- | ------- | ---- |  | - | --------- | 
|                                               |  | 2000           |         | 1999
|                                               |  |                |         |     
|                                               |  | (in thousands)
|Land                                           |  | $              | 34,861  |      |  | $ | 51,815    | 
|                                              
|                                              
|                                              
|                                              
|Building and leasehold interests               |  |                | 161,800 |      |  |   | 230,414   | 
|                                              
|                                              
|                                              
|                                              
|Machinery and equipment                        |  |                | 368,752 |      |  |   | 724,322   | 
|                                              
|                                              
|                                              
|                                              
|Construction in progress                       |  |                | 22,030  |      |  |   | 139,889   | 
|                                               |  |                |         |      |  |   |           | 
|                                               |  |                | 587,443 |      |  |   | 1,146,440 | 
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |                | 226,847 |      |  |   | 434,813   | 
|                                               |  |                |         |      |  |   |           | 
|                                               |  | $              | 360,596 |      |  | $ | 711,627   | 
|                                               |  |                |         |      |  |   |           | 

Depreciation and amortization of property, plant and equipment totaled
$64,546,000, $64,153,000 and $59,842,000 in 2000, 1999 and 1998,
respectively. The Company capitalized interest in 2000, 1999 and 1998
amounting to $3,103,000, $5,739,000 and $2,999,000, respectively, related
to the construction and equipping of production facilities for its
newspaper in Chicago.

F-18



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(4) Long-Term Debt

|                                                        |                                                                                     |                                        |         |                |       |      |           |         |         | 
|------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------- | ------- | -------------- | ----- | ---- | --------- | ------- | ------- | 
|                                                        |                                                                                     |                                        |         | 2000           |       | 1999
|                                                        |                                                                                     |                                        |         |                |       |     
|                                                        |                                                                                     |                                        |         | (in thousands)
|Hollinger International Publishing Inc. (Publishing):
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Senior Subordinated Notes due 2006                                                  |                                        | $       | 250,000        |       |      | $         | 250,000 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Senior Notes due 2005                                                               |                                        |         | 260,000        |       |      |           | 260,000 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Senior Subordinated Notes due 2007                                                  |                                        |         | 290,000        |       |      |           | 290,000 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Bank Credit Facility due 2004                                                       |                                        |         |               |       |      |           | 95,012  |        
|                                                       
|                                                       
|                                                       
|                                                       
|HIF Corp. (HIF):                                     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                     | Bank Credit Facility due 2004          |         |                |      |      |           |         | 299,985 | 
|                                                       
|                                                       
|                                                       
|                                                       
|United States Newspaper Group:                         
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Amounts due under non-interest bearing
non-competition
    agreements due 2001-2007 |                                        |         | 4,584          |       |      |           | 4,282   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other due 2001-2009                                                                
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                     | (at varying interest rates up to 9%)   |         |                | 3,139 |      |           |         | 3,007   | 
|                                                       
|                                                       
|                                                       
|                                                       
|Telegraph Group Ltd. (Telegraph):                    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Obligations under capital leases (note 5)                                           |                                        |         | 2,663          |       |      |           | 6,367   |        
|                                                       
|                                                       
|                                                       
|                                                       
|HCPH:                                                  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Bank Credit Facility due 2004                                                       |                                        |         |               |       |      |           | 244,864 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Southam:                                               
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Bank Credit Facility due 2004                                                       |                                        |         |               |       |      |           | 100,574 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Notes due 2001-2007                                                                
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                     | (at varying interest rates up to 8.5%) |         |                |      |      |           |         | 92,098  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Other:                                                 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other debt                                                                          |                                        |         | 1,328          |       |      |           | 6,895   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other capital leases                                                                |                                        |         | 534            |       |      |           | 852     |        
|                                                        |                                                                                     |                                        |         |                |       |      |           |        
|                                                        |                                                                                     |                                        | 812,248 |                |       |      | 1,653,936 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Less current portion included in current liabilities    |                                                                                     |                                        | 4,753   |                |       |      | 40,695    |        
|                                                        |                                                                                     |                                        |         |                |       |      |           |        
|                                                        |                                                                                     | $                                      | 807,495 |                |       | $    | 1,613,241 |        
|                                                        |                                                                                     |                                        |         |                |       |      |           |        

F-19



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (a) |  | The following table summarizes the terms of the Publishing
notes:
| | --- |  | -----------------------------------------------------------------

| |              |  |          |        |       |  |                  |  |                     |  |                  |  |                           |  |                                                          
| | ------------ |  | -------- | ------ | ----- |  | ---------------- |  | ------------------- |  | ---------------- |  | ------------------------- |  | ---------------------------------------------------------
| |              |  |          |        |       |  |                  |  |                     |  |                  |  | Early                     |  | Early                                                    
| |              |  | Interest |        | Issue |  |                  |  |                     |  | Redemption       |  | Redemption               
| | Principal    |  | Rate     |        | Date  |  | Status           |  | Maturity            |  | Date             |  | Price                    
| |              |  |          |        |       |  |                  |  |                     |  |                  |  |                          
| | $250,000,000 |  |          | 9.25%  |       |  | February 1,
1996 |  | Senior Subordinated |  | February 1,
2006 |  | February 1,
2001 or after |  | 2001-104.625%
2002-103.085%
2003-101.545%
Thereafter-100%
| |              |  |          |        |       |  |                  |  |                     |  |                  |  |                           |  |                                                          
| | $260,000,000 |  |          | 8.625% |       |  | March 18,
1997   |  | Senior              |  | March 15,
2005   |  | None                      |  |                                                         
| |              |  |          |        |       |  |                  |  |                     |  |                  |  |                           |  |                                                          
| | $290,000,000 |  |          | 9. 25% |       |  | March 18,
1997   |  | Senior
Subordinated |  | March 15,
2007   |  | March 15,
2002 or
after   |  | 2002-104.625%
2003-103.083%
2004-101.541%
Thereafter-100%
| |              |  |          |        |       |  |                  |  |                     |  |                  |  |                           |  |                                                          



| |  | Interest on these notes is payable semi-annually and the notes are
guaranteed by the Company.
| |  | ---------------------------------------------------------------------------------------------



| |  | The Indentures relating to the Senior Notes and Senior Subordinated
Notes contain similar financial covenants and negative covenants that
limit Publishings ability to, among other things, incur indebtedness,
pay dividends or make other distributions on its capital stock, enter
into transactions with affiliates, and sell assets including stock of a
restricted subsidiary. The Indentures provide that upon a Change of
Control (as defined in the Indentures), each noteholder has the right
to require Publishing to purchase all or any portion of such
noteholders notes at a cash purchase price equal to 101% of the
principal amount of such notes, plus accrued and unpaid interest.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On January 28, 1999, the Company solicited consents from the registered
holders of the Senior Notes and Senior Subordinated Notes to amend the
indentures covering said notes to (i) make the limitation on restricted
payments covenant less restrictive, (ii) make the consolidated cash
flow ratio under the limitation on indebtedness covenant more
restrictive, and (iii) make the limitation on sale of assets covenant
less restrictive. The requisite consents were obtained in March 1999
and the indentures governing the Senior Notes and Senior Subordinated
Notes were so amended.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-20



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (b) |  | In June 2000, Publishing, HCPH, Telegraph, Southam, HIF and a
group of financial institutions increased the term loan component of
the Fourth Amended and Restated Credit Facility (Restated Credit
Facility) by $100,000,000 to $975,000,000. On November 16, 2000,
using the proceeds from the CanWest transaction (note 1) $972,000,000
of borrowings were repaid and the Restated Credit Facility was
reduced to $5,000,000. During 2000, interest rates under the
Restated Credit Facility ranged from 6.8% to 11.5%.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Subsequent to December 31, 2000, the Company entered into a new credit
facility in the amount of $120,000,000 of which $53,000,000 had been
drawn by February 23, 2001. This facility matures September 30, 2001.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On April 30, 1999, Publishing, HCPH, Telegraph, Southam, HIF and a
group of financial institutions entered into the Restated Credit
Facility for a total of $725,000,000 consisting of a $475,000,000
revolving credit line maturing on September 30, 2004 and a $250,000,000
term loan maturing on December 31, 2004. This facility replaced the
previous Bank Credit Facility. The Loans under the Restated Credit
Facility bore interest, at the option of the respective borrower, at a
rate per annum tied to specified floating rates or a reserve adjusted
Eurocurrency rate, in each case plus a specified margin determined
based on leverage ratios.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 4, 1999, the revolving credit line was increased by
$50,000,000. On September 30, 1999, the Restated Credit Facility was
increased to $875,000,000 when the revolving credit line and the term
loan were each increased by $50,000,000.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | At December 31, 1999, Publishing had borrowings under the Restated
Credit Facility of $95,012,000, HCPH had borrowings of $244,864,000,
HIF had borrowings of $299,985,000 and Southam had borrowings of
$100,574,000. At December 31, 1999, the interest rates on the Restated
Credit Facility ranged from 6.8% to 9.4%.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On April 7, 1997, Publishing, HCPH, the Telegraph and a group of
financial institutions entered into a long-term bank credit facility
(the Bank Credit Facility). At December 31, 1998, after a number of
amendments and restatements, the Bank Credit Facility totaled
$625,000,000.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On February 2, 1999, the Bank Credit Facility was reduced by
$380,000,000 with part of the proceeds from the sale of the 45 U.S.
community newspapers. The Bank Credit Facility was subsequently
replaced by the Restated Credit Facility.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-21



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued



| | (c) |  | Southam converted a portion of its variable rate interest
exposure to fixed rate by entering into a ten year Cdn. $25,000,000
fixed rate interest swap at 8.7%, maturing May 2004. During 2000,
Southam repaid Cdn. $12,500,000 of this fixed rate interest swap.
Southam pays interest at the fixed rate and it receives interest
based on the three-month bankers acceptance rate, which is reset
quarterly, on the notional principal.                                        
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (d) |  | The Companys agreements with banks and other debtors contain
various restrictive provisions relating to maintenance of certain
financial ratios, restrictions on additional indebtedness, occurrence
of certain corporate transactions and limitations on the amount of
capital expenditures and restricted payments (which generally include
dividends and management fees). At December 31, 2000, the Company
was in compliance with the aforementioned restrictive provisions.
|
| | (e) |  | Principal amounts payable on long-term debt, excluding
obligations under capital leases, are:
 2001 - $2,090,000; 2002 - $3,641,000, 2003 - $1,515,000, 2004 - $862,000
and 2005 - $260,677,000.                                                                                                                                                                                                                                                                                  
|
| | (f) |  | Interest paid for 2000, 1999 and 1998 was $145,902,000,
$132,534,000 and $118,563,000, respectively.                                                                                                                                                                                                                                                                                                                                                                              
|
| | (g) |  | Extraordinary losses arising on debt extinguishments are net of
a related tax recovery of $4,222,000
(1999 - $3,455,000; 1998 -
$3,378,000).                                                                                                                                                                                                                                                                                                                                      

(5) Leases

The Company leases various facilities and equipment under non-cancelable
operating lease arrangements. Rental expense under all operating leases
was approximately $16,465,000, $14,936,000 and $16,724,000 in 2000, 1999
and 1998, respectively.

F-22



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Minimum lease commitments together with the present value of obligations
at December 31, 2000 are as follows:

|                                                     |  |                |       |           |  |   |         | 
|---------------------------------------------------- |  | -------------- | ----- | --------- |  | - | ------- | 
|                                                     |  | Capital        |       | Operating
|                                                     |  | leases         |       | leases   
|                                                     |  |                |       |          
|                                                     |  | (in thousands)
|2001                                                 |  | $              | 2,663 |           |  | $ | 12,943  | 
|                                                    
|                                                    
|                                                    
|                                                    
|2002                                                 |  |                |      |           |  |   | 11,021  | 
|                                                    
|                                                    
|                                                    
|                                                    
|2003                                                 |  |                |      |           |  |   | 10,085  | 
|                                                    
|                                                    
|                                                    
|                                                    
|2004                                                 |  |                |      |           |  |   | 10,534  | 
|                                                    
|                                                    
|                                                    
|                                                    
|2005                                                 |  |                |      |           |  |   | 8,711   | 
|                                                    
|                                                    
|                                                    
|                                                    
|Later years                                          |  |                |      |           |  |   | 81,441  | 
|                                                     |  |                |       |           |  |   |         | 
|                                                     |  |                | 2,663 |           |  | $ | 134,735 | 
|                                                     |  |                |       |           |  |   |         | 
|Less imputed interest and executory costs            |  |                |      |          
|                                                     |  |                |       |          
|                                                    
|                                                    
|                                                    
|                                                    
|Present value of net minimum payments                |  |                | 2,663 |          
|Less current portion included in current liabilities |  |                | 2,663 |          
|                                                     |  |                |       |          
|Long-term obligations                                |  | $              |      |          
|                                                     |  |                |       |          

F-23



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(6) Minority Interest

|                            |  |                |        |      |  |   |         | 
|--------------------------- |  | -------------- | ------ | ---- |  | - | ------- | 
|                            |  | 2000           |        | 1999
|                            |  |                |        |     
|                            |  | (in thousands)
|Common shares of subsidiary |  | $              | 24,714 |      |  | $ | 2,364   | 
|                           
|                           
|                           
|                           
|Partnership units           |  |                | 63,514 |      |  |   | 78,453  | 
|                           
|                           
|                           
|                           
|Special shares of HCPH      |  |                |       |      |  |   | 74,084  | 
|                           
|                           
|                           
|                           
|Other                       |  |                | 1,000  |      |  |   | 1,000   | 
|                            |  |                |        |      |  |   |         | 
|                            |  | $              | 89,228 |      |  | $ | 155,901 | 
|                            |  |                |        |      |  |   |         | 

In July 1997, HCPH issued 6,552,425 Cdn.  $10 Non-Voting Special Shares for
a total issue price of Cdn. $65,524,000 ($47,564,000). These shares were
exchangeable, at the option of the holder, at any time before June 26,
2000 into newly issued Class A Common Stock of the Company. At December
31, 1999, the exchange ratio was 0.590 shares of Class A Common Stock per
Special share. For the period from June 9, 2000 through June 25, 2000,
the exchange ratio was 0.602 shares of Class A Common Stock per Special
share. On June 12, 2000, the Company exercised its option to pay cash on
the mandatory exchange of HCPH Special shares. Pursuant to the terms of
the indenture governing the Special shares, each Special share was
exchanged for $8.88 cash resulting in a payment in July to Special
shareholders of $58,200,000. This payment was $10,900,000 in excess of
the recorded book amount. This excess amount is presented as minority
interest in the Statement of Operations. During 1999, 1,966 HCPH Special
shares were tendered for exchange and the Company opted to pay $1,900 cash
in exchange for the shares tendered.

In September 1997, an additional 4,146,107 Special shares of HCPH were
issued for a total issue price of Cdn. $41,500,000 ($29,000,000) in
exchange for 4,146,107 Special shares in 3396754 Canada Limited
(3396754), a subsidiary of Hollinger Inc. These shares have the same
terms and conditions as the Special shares described in the previous
paragraph. The Companys obligation to issue Class A Common
Stock was,
however, offset by an obligation of Hollinger Inc., through a subsidiary,
to deliver those shares of Class A Common Stock from its holdings. These
Special shares were exchanged for cash by Hollinger Inc. in 2000.

F-24



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(7) Redeemable Preferred Stock

In 1995, the Company issued 739,500 shares of Series A Preferred Stock to
Hollinger Inc. and these were subsequently converted into 739,500 shares
of Series D Preferred Stock. On September 30, 1998, 408,551 shares of
Series D Preferred Stock were converted by Hollinger Inc. into 2,795,165
shares of Class A Common Stock and these shares were purchased from
Hollinger Inc. by a group of banks pursuant to the Total Return Equity
Swap described in note 11. In February 1999, 196,823 shares of Series D
Preferred Stock were redeemed for cash of $19,362,000 leaving 134,126
shares outstanding. In May 1999, the remaining shares of Series D
Preferred Stock were converted into 134,126 shares of Series E Preferred
Stock.

Shares of Series E Preferred Stock are redeemable at the option of either
the holder or the Company at a price of Cdn. $146.63 ($97.79 based on
December 31, 2000 exchange rates) plus accrued dividends. The holder of
these shares may, at any time, convert such shares into shares of Class A
Common Stock of the Company at a conversion price of $14.00 per share of
Class A Common Stock. The Series E Preferred Stock ranks senior to the
Series C Preferred Stock as to dividends and upon liquidation. The Series
E Preferred Stock is non-voting and is entitled to receive cumulative cash
dividends, payable quarterly. The amount of each quarterly dividend per
share is equal to the product of (a) the redemption price of Cdn. $146.63
divided by the Canadian dollar equivalent of the conversion price and (b)
the per share amount of the regularly scheduled dividend on Class A Common
Stock. In 2000, the dividend on the Series E Preferred Stock amounted to
$3.87 per share.At December 31, 2000, 134,126 shares of Series E
Preferred Stock were outstanding and based on exchange rates in effect on
that day were exchangeable into 937,000 shares of Class A Common Stock of
the Company.

(8) Stockholders Equity

The Company is authorized to issue 20,000,000 shares of preferred stock in
one or more series and to designate the rights, preferences, limitations
and restrictions of and upon shares of each series, including voting,
redemption and conversion rights. In addition to the Series E Preferred
Stock referred to in note 7 above, the Company has issued Series B and
Series C Preferred Stock. The terms and conditions of these shares are
described below:

F-25



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Series B

These shares underlie an issue of Preferred Redeemable Increased Dividend
Equity Securities (PRIDES). The PRIDES are depository shares and each
one, in effect, represents one-half of a share of Series B Preferred
Stock. Each PRIDES has a stated value of $9.75 and is entitled to
cumulative dividends at a rate of 9.75% per annum payable quarterly. In
July 1998, pursuant to an exchange offer, 19,993,531 PRIDES were exchanged
for 18,394,048 shares of Class A Common Stock, and in January 2000 the
remaining 706,469 PRIDES were converted to 596,189 shares of Class A
Common Stock. At December 31, 2000 all issued Series B Preferred Stock
had been converted to Class A Common Stock.

Series C

Pursuant to a January 1997 transaction wherein HCPH acquired Canadian
publishing assets from Hollinger Inc., the Company issued 829,409 shares
of Series C Preferred Stock. These shares are similar to the PRIDES
described above. The stated value of each share is $108.51 and cumulative
dividends are payable quarterly at 9.5% per annum of this amount. Between
June 1, 2000 and June 1, 2001, the Company can redeem the Series C
Preferred Stock based on the market value of the shares of Class A Common
Stock for no less than 8.503 shares of Class A Common Stock per share of
Series C Preferred Stock. If not previously redeemed, the stock will
mandatorily convert into 9.8646 shares of Class A Common Stock on June 1,
2001. The Series C Preferred Stock ranks junior to the Series E Preferred
Stock as to dividends and upon liquidation. The holders of Series C
Preferred Stock have the right to vote together as a single class with the
holders of Class A and Class B Common Stock in the election of Directors
and upon each other matter coming before the stockholders of the Company
on the basis of ten votes per share of Series C Preferred Stock. At the
8.503 conversion ratio, these shares will convert into 7,052,464 shares of
Class A Common Stock. This conversion ratio will be in effect at any time
that the market value of the Class A Common Stock is $12.76 or higher.

Class A and Class B Common Stock

Class A Common Stock and Class B Common Stock have identical rights with
respect to cash dividends and in any sale or liquidation, but different
voting rights. Each share of Class A Common Stock is entitled to one vote
per share and each share of Class B Common Stock is entitled to ten votes
per share on all matters, including the election of directors, where the
two classes vote together as a single class. Class B Common Stock is
convertible at any time at the option of Hollinger Inc. into Class A
Common Stock on a share-for-share basis and is transferable by Hollinger
Inc. under certain conditions.

F-26



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

During 1999, the Company repurchased 9,978,600 shares of Class A Common
Stock for approximately $123,500,000.

General

A significant portion of the Companys operating income and net earnings
is derived from foreign subsidiaries and affiliated companies. As an
international holding company, the Companys ability to meet its financial
obligations is dependent upon the availability of cash flows from foreign
subsidiaries and affiliated companies (subject to applicable withholding
taxes) through dividends, intercompany advances, management fees and other
payments. The Companys subsidiaries and affiliated companies are under
no obligation to pay dividends.

(9) Stock Option Plan

During May 1994, the Company adopted the Hollinger International Inc. 1994
Stock Option Plan (the 1994 Plan). The 1994 Plan was amended in
September 1996 to increase the number of shares authorized for issuance up
to 1,471,140 shares. In 1997, the Company adopted the 1997 Stock
Incentive Plan (the Incentive Plan). The Incentive Plan provided for
awards of up to 5,156,915 shares of Class A Common Stock. The Incentive
Plan is administered by an independent committee (Committee) of the
Board of Directors. The Committee has the authority to determine the
employees to whom awards will be made, the amount and type of awards, and
the other terms and conditions of the awards. In 1999, the Company
adopted the 1999 Stock Incentive Plan (1999 Stock Plan) which superseded
the previous two plans.

The 1999 Stock Plan provides for awards of up to 8,500,000 shares of Class
A Common Stock. The 1999 Stock Plan authorizes the grant of incentive
stock options and nonqualified stock options. The exercise price for
stock options must be at least equal to 100% of the fair market value of
the Class A Common Stock on the date of grant of such option.

Southam had a stock option plan under which options had been granted to
executives and employees. At December 31, 1998, all options granted had
been exercised.

F-27



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. On March 31, 2000, the FASB issued
Interpretation No. 44 Accounting for Certain Transactions Involving Stock
Compensation (FIN 44), which provided guidance on several implementation
issues related to Accounting Principle Board Opinion No. 25. The most
relevant to the Company was the clarification of the accounting for stock
options that have been repriced. The Company adopted FIN 44 effective
July 1, 2000.

In 1999, the Company repriced a series of stock options which had
originally been issued in 1998. Under FIN 44 these repriced options
effectively change to a variable stock option award and are subject to
compensation expense. Accordingly the stock based compensation expense
determined for this repriced series for the period July 1 to December 31,
2000 amounted to $1,518,000 and has been charged against income.

For all other series of stock options, no compensation cost has been
recognized. Had the Company determined compensation costs based on the
fair value at the grant date of its stock options under FASB Statement of
Financial Accounting Standards No. 123 (FAS 123), the Companys net
earnings and earnings per share would have been reduced to the pro forma
amounts indicated in the following table. The pro forma effect includes
compensation expense related to stock options at Southam in 1998.

|                                       |  |      |                                         |      |  |      |         |  |  |   |         | 
|-------------------------------------- |  | ---- | --------------------------------------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                       |  | 2000 |                                         | 1999 |  | 1998
|                                       |  |      |                                         |      |  |     
|                                       |  |      | (in thousands except per share amounts)
|Net earnings as reported               |  | $    | 117,075                                 |      |  | $    | 245,352 |  |  | $ | 196,912 | 
|                                      
|                                      
|                                      
|                                      
|Pro forma net earnings                 |  |      | 110,732                                 |      |  |      | 242,704 |  |  |   | 194,017 | 
|                                      
|                                      
|                                      
|                                      
|Basic earnings per share as reported   |  | $    | 1.10                                    |      |  | $    | 2.30    |  |  | $ | 1.65    | 
|                                      
|                                      
|                                      
|                                      
|Diluted earnings per share as reported |  |      | 1.05                                    |      |  |      | 2.09    |  |  |   | 1.43    | 
|                                      
|                                      
|                                      
|                                      
|Pro forma basic earnings per share     |  | $    | 1.03                                    |      |  | $    | 2.27    |  |  | $ | 1.62    | 
|                                      
|                                      
|                                      
|                                      
|Pro forma diluted earnings per share   |  |      | 0.99                                    |      |  |      | 2.07    |  |  |   | 1.41    | 
|                                       |  |      |                                         |      |  |      |         |  |  |   |         | 

Pro forma net earnings reflect only options granted in 1997 through 2000.
Therefore, the full impact of calculating compensation cost for stock
options under FAS 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options vesting period of four years and the compensation cost for options
granted prior to January 1, 1997 is not considered.

Calculating the compensation cost consistent with FAS 123, the fair value
of each stock option granted during 2000, 1999 and 1998 was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in fiscal 2000,
1999 and 1998, respectively: dividend yield of 3.4%, 4.5% and 3.4%;
expected volatility of 43.3%, 32.7% and 43.3%; risk-free interest rates of
5.1%, 6.4% and 5.1%; expected lives of 10 years. Weighted average fair
value of options granted by the Company during 2000, 1999 and 1998 was
$4.12, $3.81 and $5.12, respectively.

F-28



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Stock option activity with respect to the Companys stock options was as
follows:

|                                         |  |           |            |                  |  |   |       | 
|---------------------------------------- |  | --------- | ---------- | ---------------- |  | - | ----- | 
|                                         |  | Number of |            | Weighted Average
|                                         |  | Shares    |            | Exercise Price  
|                                         |  |           |            |                 
|Options outstanding at December 31, 1997 |  |           | 2,099,500  |                  |  | $ | 11.01 | 
|                                        
|                                        
|                                        
|                                        
|Options granted                          |  |           | 1,383,000  |                  |  |   | 15.09 | 
|                                        
|                                        
|                                        
|                                        
|Options exercised                        |  |           | (167,125   | )                |  |   | 11.78 | 
|                                        
|                                        
|                                        
|                                        
|Options canceled                         |  |           | (167,750   | )                |  |   | 11.43 | 
|                                         |  |           |            |                  |  |   |       | 
|Options outstanding at December 31, 1998 |  |           | 3,147,625  |                  |  |   | 12.74 | 
|                                        
|                                        
|                                        
|                                        
|Options granted                          |  |           | 3,475,000  |                  |  |   | 12.27 | 
|                                        
|                                        
|                                        
|                                        
|Options exercised                        |  |           | (116,000   | )                |  |   | 11.24 | 
|                                        
|                                        
|                                        
|                                        
|Options canceled                         |  |           | (1,357,125 | )                |  |   | 14.93 | 
|                                         |  |           |            |                  |  |   |       | 
|Options outstanding at December 31, 1999 |  |           | 5,149,500  |                  |  |   | 11.88 | 
|                                        
|                                        
|                                        
|                                        
|Options granted                          |  |           | 2,559,250  |                  |  |   | 10.57 | 
|                                        
|                                        
|                                        
|                                        
|Options exercised                        |  |           | (471,063   | )                |  |   | 11.67 | 
|                                        
|                                        
|                                        
|                                        
|Options canceled                         |  |           | (536,374   | )                |  |   | 12.11 | 
|                                         |  |           |            |                  |  |   |       | 
|Options outstanding at December 31, 2000 |  |           | 6,701,313  |                  |  | $ | 11.38 | 
|                                         |  |           |            |                  |  |   |       | 
|Options exercisable at December 31, 1998 |  |           | 915,375    |                  |  | $ | 11.65 | 
|                                        
|                                        
|                                        
|                                        
|Options exercisable at December 31, 1999 |  |           | 1,190,625  |                  |  | $ | 11.36 | 
|                                        
|                                        
|                                        
|                                        
|Options exercisable at December 31, 2000 |  |           | 1,989,548  |                  |  | $ | 11.51 | 
|                                         |  |           |            |                  |  |   |       | 

F-29



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(10) Earnings per Share

The following table reconciles the numerator and denominator for the
calculation of basic and diluted earnings per share for the years ended
December 31, 2000, 1999 and 1998:

|                                                                        |                          |   |                                       |       |               |  |           |       |  |   |      |  | 
|----------------------------------------------------------------------- | ------------------------ | - | ------------------------------------- | ----- | ------------- |  | --------- | ----- |  | - | ---- |  | 
|                                                                        |                          |   | Year Ended December 31, 2000         
|                                                                        |                          |   |                                      
|                                                                        |                          |   | Income                                |       | Shares        |  | Per-Share
|                                                                        |                          |   | (Numerator)                           |       | (Denominator) |  | Amount   
|                                                                        |                          |   |                                       |       |               |  |          
|                                                                        |                          |   | (in thousands, except per share data)
|Net earnings                                                            |                          | $ | 117,075                               |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Deduct dividends:
  Convertible preferred stock                         |                          |   | (8,431                                | )    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series E Preferred Stock |   |                                       | (519  | )            
|                                                                        |                          |   |                                       |       |               |  |           |       |  |   |      |  | 
|Basic EPS                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to common
  stockholders                         |                          |   | 108,125                               |       |               |  | 98,672    |       |  | $ | 1.10 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Effect of dilutive securities:
  Convertible preferred stock            |                          |   | 519                                   |       |               |  | 936       |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series E preferred stock |   |                                       | 8,431 |               |  |           | 8,182 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | HCPH Special shares      |   |                                       |      |               |  |           | 2,469 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Stock options            |   |                                       |      |               |  |           | 1,251 | 
|                                                                        |                          |   |                                       |       |               |  |           |       |  |   |      | 
|Diluted EPS                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to
common
  stockholders and assumed conversions |                          | $ | 117,075                               |       |               |  | 111,510   |       |  | $ | 1.05 | 
|                                                                        |                          |   |                                       |       |               |  |           |       |  |   |      | 

F-30



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      |  | 
|----------------------------------------------------------------------- | ------------------------ | - | ------------------------------------- | ---- | ------------- |  | --------- | ----- |  | - | ---- |  | 
|                                                                        |                          |   | Year Ended December 31, 1999         
|                                                                        |                          |   |                                      
|                                                                        |                          |   | Income                                |      | Shares        |  | Per-Share
|                                                                        |                          |   | (Numerator)                           |      | (Denominator) |  | Amount   
|                                                                        |                          |   |                                       |      |               |  |          
|                                                                        |                          |   | (in thousands, except per share data)
|Net earnings                                                            |                          | $ | 245,352                               |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Deduct dividends:
  Convertible preferred stock                         |                          |   | (9,221                                | )   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series E Preferred Stock |   |                                       | (262 | )            
|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      | 
|Basic EPS                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to
common
  stockholders                         |                          |   | 235,869                               |      |               |  | 102,553   |       |  | $ | 2.30 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Effect of dilutive
securities:
  Convertible preferred stock            |                          |   | 9,221                                 |      |               |  | 8,778     |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series E Preferred Stock |   |                                       | 262  |               |  |           | 973   | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | HCPH Special shares      |   |                                       |     |               |  |           | 4,930 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Stock options            |   |                                       |     |               |  |           | 376   | 
|                                                                        |                          |   |                                       |      |               |  |           |      
|Diluted EPS                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to
common
  stockholders and assumed conversions |                          | $ | 245,352                               |      |               |  | 117,610   |       |  | $ | 2.09 | 
|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      | 

F-31



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      |  | 
|----------------------------------------------------------------------- | ------------------------ | - | ------------------------------------- | ---- | ------------- |  | --------- | ----- |  | - | ---- |  | 
|                                                                        |                          |   | Year Ended December 31, 1998         
|                                                                        |                          |   |                                      
|                                                                        |                          |   | Income                                |      | Shares        |  | Per-Share
|                                                                        |                          |   | (Numerator)                           |      | (Denominator) |  | Amount   
|                                                                        |                          |   |                                       |      |               |  |          
|                                                                        |                          |   | (in thousands, except per share data)
|Net earnings                                                            |                          | $ | 176,003                               |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Deduct dividends:                                                      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Convertible preferred stock                                             |                          |   | (18,726                               | )   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series D Preferred Stock |   |                                       | (736 | )            
|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      | 
|Basic EPS                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to common
  stockholders                         |                          |   | 156,541                               |      |               |  | 94,839    |       |  | $ | 1.65 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Effect of dilutive
securities:
  Convertible preferred stock            |                          |   | 18,726                                |      |               |  | 18,763    |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Series D Preferred Stock |   | 736                                   |      |               |  | 4,350     |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | HCPH Special shares      |   |                                       |     |               |  |           | 4,661 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Stock options            |   |                                       |     |               |  |           | 521   | 
|                                                                        |                          |   |                                       |      |               |  |           |      
|Diluted EPS                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net earnings available to common
  stockholders and assumed conversions |                          | $ | 176,003                               |      |               |  | 123,134   |       |  | $ | 1.43 | 
|                                                                        |                          |   |                                       |      |               |  |           |       |  |   |      | 

For 1998, net earnings available to common stockholders has been reduced
by $20,909,000 which represents the conversion premium on the PRIDES
exchange.

Earnings (loss) per share related to extraordinary items were as follows:

|        |  |      |       |      |  |      |       |   |  |   |       |  
|------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|        |  | 2000 |       | 1999 |  | 1998
|        |  |      |       |      |  |     
|Basic   |  | $    | (0.06 | )    |  | $    | (0.05 | ) |  | $ | (0.05 | )
|       
|       
|       
|       
|Diluted |  | $    | (0.06 | )    |  | $    | (0.04 | ) |  | $ | (0.04 | )
|        |  |      |       |      |  |      |       |   |  |   |       |  

F-32



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(11) Total Return Equity Swap

In August and September 1998, the Company entered into an arrangement with
four banks, pursuant to which the banks purchased 12,640,305 shares of the
Companys Class A Common Stock. 2,522,600 of these shares were purchased
on the open market at an average price of $15.40 and 10,117,705 were
purchased from affiliates of the Company at an average price of $13.88.
During 1999, an additional 1,469,600 shares were purchased on the open
market at an average price of $13.96. The Company had the option,
quarterly, up to and including September 30, 2000 to buy the shares from
the banks at the same cost or to have the banks resell those shares in the
open market. This arrangement was extended until June 30, 2001. In the
event the banks resell the shares, any gain or loss realized by the banks
will be for the Companys account. Until the Company purchases the
shares, dividends paid on the shares belong to the Company and the Company
pays interest to the banks, based on their purchase price, at the rate of
LIBOR plus a spread. If the Companys stock price falls below the average
purchase price of these shares, the Company is required to deposit cash or
shares into an escrow account as additional security. During 2000, 1999
and 1998, the Company issued 5,160,577, 4,063,539 and 1,363,293 shares of
Class A Common Stock as additional security, of which 129,038 shares were
required to be deposited in the escrow account at December 31, 2000. The
balance of 10,458,371 shares which had been issued have been returned to
the Company and are included in treasury. The shares held in escrow are
shown as a deduction from stockholders equity. Until September 30, 2000
when the original contracts expired the total interest paid to the banks,
net of dividends paid on the shares, is shown as a reduction to additional
paid in capital on the balance sheet.

On November 16, 2000, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 00-19 which clarified the accounting for derivative financial
instruments indexed to, and potentially settled in a companys own stock,
that require a cash payment by the issuer upon the occurrence of future
events outside the control of the issuer. The EITF applies to new
contracts entered after September 30, 2000. Consequently the extension of
the contracts on October 1, 2000 is accounted for under EITF Issue No.
00-19. Accordingly, effective October 1, 2000, the above contracts have
been accounted for using the asset and liability method. As a result, the
derivative forward contract has been marked to market for the period
October 1 to December 31, 2000. The $35,314,000 gain inherent in the old
contracts at October 1, 2000 net of previously deferred costs associated
with the old contracts has been recorded as an adjustment to additional
paid in capital and the loss during the period October 1 to December 31,
2000, together with the interest paid to the banks, which together totaled
$16,334,000 has been reported in earnings as Other income, net.
Dividends, in respect of the shares purchased by the banks, after
September 30, 2000, are not included in cash dividends as a deduction from
retained earnings.

F-33



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(12) Infrequent Items

|                                                      |  |      |       |      |  |                |        |  |  |   |        | 
|----------------------------------------------------- |  | ---- | ----- | ---- |  | -------------- | ------ |  |  | - | ------ | 
|                                                      |  | 2000 |       | 1999 |  | 1998          
|                                                      |  |      |       |      |  |               
|                                                      |  |      |       |      |  | (in thousands)
|Pension and post-retirement plan liability adjustment |  | $    |      |      |  | $              | 11,943 |  |  | $ |       | 
|                                                     
|                                                     
|                                                     
|                                                     
|New Chicago plant pre-operating costs                 |  |      | 6,774 |      |  |                | 4,398  |  |  |   |       | 
|                                                     
|                                                     
|                                                     
|                                                     
|National Postlaunch costs                             |  |      |      |      |  |                |       |  |  |   | 13,112 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Other                                                 |  |      | 1,176 |      |  |                | 5,705  |  |  |   | 13,060 | 
|                                                      |  |      |       |      |  |                |        |  |  |   |        | 
|                                                      |  | $    | 7,950 |      |  | $              | 22,046 |  |  | $ | 26,172 | 
|                                                      |  |      |       |      |  |                |        |  |  |   |        | 

(13) Other Income, net

|                                                                              |  |      |         |      |  |                |         |   |  |   |         |  
|----------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | -------------- | ------- | - |  | - | ------- | -
|                                                                              |  | 2000 |         | 1999 |  | 1998          
|                                                                              |  |      |         |      |  |               
|                                                                              |  |      |         |      |  | (in thousands)
|Net gains on sales of publishing interests (note 1)                           |  | $    | 493,156 |      |  | $              | 270,017 |   |  | $ | 363,074 |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Gains on sales of assets                                                      |  |      | 32,569  |      |  |                | 3,561   |   |  |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Gain related to dilution of Hollinger L.P.
interest (note 1)                  |  |      |        |      |  |                | 77,297  |   |  |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Gain related to dilution of investment in
equity accounted
  company (note 1) |  |      | 17,008  |      |  |                |        |   |  |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Write-off of investments                                                      |  |      | (20,621 | )    |  |                |        |   |  |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Equity in loss of affiliates                                                  |  |      | (20,340 | )    |  |                | (2,106  | ) |  |   | (1,199  | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Total return equity swap (note 11)                                            |  |      | (16,334 | )    |  |                |        |   |  |   |        |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other                                                                         |  |      | (7,427  | )    |  |                | (22,426 | ) |  |   | (30,499 | )
|                                                                              |  |      |         |      |  |                |         |   |  |   |         |  
|                                                                              |  | $    | 478,011 |      |  | $              | 326,343 |   |  | $ | 331,376 |  
|                                                                              |  |      |         |      |  |                |         |   |  |   |         |  

F-34



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(14) Segment Information

The Company operates principally in the business of publishing, printing
and distribution of newspapers and magazines and holds investments
principally in companies that operate in the same business as the Company.
The Chicago Group and Community Group are located in the United States.
Southam, Hollinger L.P., National Post and the Canadian Newspapers make up
the Canadian Newspaper Group. The following is a summary of the segments
of the Company:

|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|--------------------------------------- |  | ---------------------------- | ------- | --------- |  | --------- | ------ | --------- |  | ----- | ------- | -------- |  |  | --------- |  |  | - | --------- | -
|                                        |  | Year ended December 31, 2000
|                                        |  |                             
|                                        |  |                              |         |           |  |           |        |           |  | U.K.  |         | Canadian
|                                        |  | Chicago                      |         | Community |  | Newspaper |        | Newspaper
|                                        |  | Group                        |         | Group     |  | Group     |        | Group     |  | Total
|                                        |  |                              |         |           |  |           |        |           |  |      
|                                        |  | (in thousands)              
|Revenues                                |  | $                            | 401,417 |           |  |           | 67,336 |           |  |       | 562,068 |          |  |  | 1,065,198 |  |  | $ | 2,096,019 |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Depreciation and amortization           |  | $                            | 24,083  |           |  |           | 6,246  |           |  |       | 17,588  |          |  |  | 74,717    |  |  | $ | 122,634   |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Infrequent items                        |  | $                            | 6,803   |           |  |           |       |           |  |       |        |          |  |  | 1,147     |  |  | $ | 7,950     |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Operating income                        |  | $                            | 26,157  |           |  |           | 2,970  |           |  |       | 85,348  |          |  |  | 107,273   |  |  | $ | 221,748   |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Equity in earnings (loss) of affiliates |  | $                            | (703    | )         |  |           |       |           |  |       | (20,197 | )        |  |  | 560       |  |  | $ | (20,340   | )
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Total assets                            |  | $                            | 614,872 |           |  |           | 64,963 |           |  |       | 540,331 |          |  |  | 1,302,200 |  |  | $ | 2,522,366 |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  
|Capital expenditures                    |  | $                            | 25,709  |           |  |           | 3,333  |           |  |       | 14,543  |          |  |  | 28,816    |  |  | $ | 72,401    |  
|                                        |  |                              |         |           |  |           |        |           |  |       |         |          |  |  |           |  |  |   |           |  

|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|--------------------------------------- |  | ---------------------------- | ------- | --------- |  | --------- | ------- | --------- |  | ----- | ------- | -------- |  |  | --------- |  |  | - | --------- | -
|                                        |  | Year ended December 31, 1999
|                                        |  |                             
|                                        |  |                              |         |           |  |           |         |           |  | U.K.  |         | Canadian
|                                        |  | Chicago                      |         | Community |  | Newspaper |         | Newspaper
|                                        |  | Group                        |         | Group     |  | Group     |         | Group     |  | Total
|                                        |  |                              |         |           |  |           |         |           |  |      
|                                        |  | (in thousands)              
|Revenues                                |  | $                            | 390,473 |           |  |           | 96,674  |           |  |       | 550,474 |          |  |  | 1,109,781 |  |  | $ | 2,147,402 |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Depreciation and amortization           |  | $                            | 19,955  |           |  |           | 9,100   |           |  |       | 18,957  |          |  |  | 77,396    |  |  | $ | 125,408   |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Infrequent items                        |  | $                            | 5,512   |           |  |           | 301     |           |  |       | 7,891   |          |  |  | 8,342     |  |  | $ | 22,046    |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Operating income                        |  | $                            | 39,722  |           |  |           | 9,170   |           |  |       | 62,116  |          |  |  | 101,794   |  |  | $ | 212,802   |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Equity in earnings (loss) of affiliates |  | $                            | (482    | )         |  |           |        |           |  |       | (2,140  | )        |  |  | 516       |  |  | $ | (2,106    | )
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Total assets                            |  | $                            | 457,613 |           |  |           | 162,887 |           |  |       | 580,078 |          |  |  | 2,186,931 |  |  | $ | 3,387,509 |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Capital expenditures                    |  | $                            | 40,941  |           |  |           | 4,925   |           |  |       | 5,555   |          |  |  | 72,425    |  |  | $ | 123,846   |  
|                                        |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  

F-35



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|----------------------------- |  | ---------------------------- | ------- | --------- |  | --------- | ------- | --------- |  | ----- | ------- | -------- |  |  | --------- |  |  | - | --------- | -
|                              |  | Year ended December 31, 1998
|                              |  |                             
|                              |  |                              |         |           |  |           |         |           |  | U.K.  |         | Canadian
|                              |  | Chicago                      |         | Community |  | Newspaper |         | Newspaper
|                              |  | Group                        |         | Group     |  | Group     |         | Group     |  | Total
|                              |  |                              |         |           |  |           |         |           |  |      
|                              |  | (in thousands)              
|Revenues                      |  | $                            | 379,109 |           |  |           | 210,107 |           |  |       | 550,525 |          |  |  | 1,058,019 |  |  | $ | 2,197,760 |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Depreciation and amortization |  | $                            | 20,311  |           |  |           | 19,267  |           |  |       | 19,413  |          |  |  | 55,857    |  |  | $ | 114,848   |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Infrequent items              |  | $                            | 825     |           |  |           | 2,000   |           |  |       | 6,250   |          |  |  | 17,097    |  |  | $ | 26,172    |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Operating income              |  | $                            | 33,268  |           |  |           | 36,312  |           |  |       | 60,208  |          |  |  | 152,291   |  |  | $ | 282,079   |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Equity in loss of affiliates  |  | $                            | (1,199  | )         |  |           |        |           |  |       |        |          |  |  |          |  |  | $ | (1,199    | )
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Total assets                  |  | $                            | 429,882 |           |  |           | 409,604 |           |  |       | 619,637 |          |  |  | 1,685,960 |  |  | $ | 3,145,083 |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  
|Capital expenditures          |  | $                            | 75,647  |           |  |           | 8,825   |           |  |       | 7,114   |          |  |  | 69,211    |  |  | $ | 160,797   |  
|                              |  |                              |         |           |  |           |         |           |  |       |         |          |  |  |           |  |  |   |           |  

Capital expenditures for the corporate entities were $1,623,000, $1,437,000
and $3,200,000 in 2000, 1999 and 1998, respectively.

Reconciliation of segment assets to total assets:

|                 |  |                         |           |      |  |      |           |  |  |   |           | 
|---------------- |  | ----------------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                 |  | Year ended December 31,
|                 |  |                        
|                 |  | 2000                    |           | 1999 |  | 1998
|                 |  |                         |           |      |  |     
|                 |  | (in thousands)         
|Segment assets   |  | $                       | 2,522,366 |      |  | $    | 3,387,509 |  |  | $ | 3,145,083 | 
|                
|                
|                
|                
|Corporate assets |  |                         | 228,631   |      |  |      | 115,515   |  |  |   | 106,641   | 
|                 |  |                         |           |      |  |      |           |  |  |   |           | 
|Total assets     |  | $                       | 2,750,997 |      |  | $    | 3,503,024 |  |  | $ | 3,251,724 | 
|                 |  |                         |           |      |  |      |           |  |  |   |           | 

(15) Financial Instruments

The Company has entered into various types of financial instruments in the
normal course of business. In addition, on September 30, 1998, the
Company entered into forward purchase contracts to purchase shares of its
Class A Common Stock (see note 11).

For certain of these instruments, fair value estimates are made at a
specific point in time, based on assumptions concerning the amount and
timing of estimated future cash flows and assumed discount rates
reflecting varying degrees of perceived risk and the country of origin.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, may not represent actual
values of the financial instruments that could be realized in the future.

F-36



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

At December 31, 2000 and 1999, the comparison of the carrying value and
the estimated fair value of the Companys financial instruments was as
follows:

|                                             |  |          |         |       |  |                |         |       |  |   |           |  |  |   |           |  
|-------------------------------------------- |  | -------- | ------- | ----- |  | -------------- | ------- | ----- |  | - | --------- |  |  | - | --------- | -
|                                             |  | 2000     |         | 1999 
|                                             |  |          |         |      
|                                             |  | Carrying |         | Fair  |  | Carrying       |         | Fair 
|                                             |  | value    |         | value |  | value          |         | value
|                                             |  |          |         |       |  |                |         |      
|                                             |  |          |         |       |  | (in thousands)
|Long-term debt                               |  | $        | 809,585 |       |  | $              | 795,546 |       |  | $ | 1,646,718 |  |  | $ | 1,430,554 |  
|                                            
|                                            
|                                            
|                                            
|Interest rate swaps liability                |  |          | (1,251  | )     |  |                | (1,251  | )     |  |   |          |  |  |   | (1,586    | )
|                                            
|                                            
|                                            
|                                            
|Forward purchase contracts-asset (liability) |  |          | 24,079  |       |  |                | 24,079  |       |  |   |          |  |  |   | (17,251   | )
|                                             |  |          |         |       |  |                |         |       |  |   |           |  |  |   |           |  

The fair value of the interest rate swaps and forward purchase contracts
is the estimated amount that the Company would pay or receive, to
terminate the agreements. Interest rate swaps were considered a hedge
until the hedged debt was repaid in 2000. Subsequent to the debt
repayment the estimated cost to terminate the swap has been included in
income. Effective October 1, 2000 the forward purchase contracts are
recorded at their fair values as described in note 11. It is not
practical to determine the fair value of redeemable preferred stock held
by related parties. The carrying value of all other financial instruments
at December 31, 2000 and 1999 approximates their estimated fair values.

(16) Commitments and Contingencies



| | (a) |  | The Telegraph has guaranteed the printing joint venture
partners share of leasing obligations to third parties, which
amounted to $6,251,000 (£4,180,000) at December 31, 2000. These
obligations are also guaranteed jointly and severally by each joint
venture partner.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | In connection with the Companys insurance program, letters of
credit are required to support certain projected workers
compensation obligations. At December 31, 2000, letters of credit in
the amount of $2,180,000 were outstanding.                                   

F-37



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(17) Related-party Transactions



| | (a) |  | Amounts due from affiliates includes cash advances, net of
management and administrative expenses billed by Hollinger Inc. and
corporate affiliates of Hollinger Inc. Hollinger Inc. and its
affiliates billed the Company for allocable expenses amounting to
$40,979,000, $38,239,000 and $31,954,000 for 2000, 1999 and 1998,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The Hon. Conrad M. Black, P.C., O.C. indirectly has voting
control of the Company. During each of 2000, 1999 and 1998
remuneration paid by the Company and its subsidiaries to Mr. Black
was $2,477,000, $640,000, and $627,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (c) |  | On July 11, 2000 the Company loaned $36,800,000 to a
subsidiary of Hollinger Inc. in connection with the cash purchase by
Hollinger Inc. of HCPH Special shares (note 6). The loan is payable
on demand and bears interest at the rate of 13% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (d) |  | On September 30, 1998, Hollinger Inc. sold 10,117,705 shares of
Class A Common Stock to various banks. As part of the transaction, a
subsidiary of Hollinger Inc. sold 408,551 shares of Series D
Preferred Stock to such banks and the banks then tendered such shares
to the Company for conversion into 2,795,165 shares of Class A Common
Stock. In an independent transaction, the Company entered into
forward purchase contracts with such banks to purchase 10,117,705
shares of Class A Common Stock for a price of $13.88 per share. The
terms of this transaction were reviewed and approved by a special
committee comprised of independent outside directors of the Companys
Board of Directors. Credit Suisse First Boston acted as financial
advisor for the special committee.

(18) Income Taxes

U.S. and foreign components of earnings before income taxes, minority
interest and extraordinary items are presented below:

|        |  |      |         |      |  |                |         |  |  |   |         | 
|------- |  | ---- | ------- | ---- |  | -------------- | ------- |  |  | - | ------- | 
|        |  | 2000 |         | 1999 |  | 1998          
|        |  |      |         |      |  |               
|        |  |      |         |      |  | (in thousands)
|U.S     |  | $    | 27,394  |      |  | $              | 263,600 |  |  | $ | 192,191 | 
|       
|       
|       
|       
|Foreign |  |      | 521,671 |      |  |                | 149,226 |  |  |   | 314,449 | 
|        |  |      |         |      |  |                |         |  |  |   |         | 
|        |  | $    | 549,065 |      |  | $              | 412,826 |  |  | $ | 506,640 | 
|        |  |      |         |      |  |                |         |  |  |   |         | 

F-38



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Income tax expense for the periods shown below consists of:

|                              |                 |   |         |         |          |   |                |          |   |   |         |         | 
|----------------------------- | --------------- | - | ------- | ------- | -------- | - | -------------- | -------- | - | - | ------- | ------- | 
|                              |                 |   | Current |         | Deferred |   | Total         
|                              |                 |   |         |         |          |   |               
|                              |                 |   |         |         |          |   | (in thousands)
|Year ended December 31, 2000:
|                             
|                             
|                             
|                             
|                              | U.S. Federal    |   | $       | (43,366 | )        |   | $              | 91,479   |   |   | $       | 48,113  | 
|                             
|                             
|                             
|                             
|                              | Foreign         |   |         | 456,635 |          |   |                | (132,455 | ) |   |         | 324,180 | 
|                             
|                             
|                             
|                             
|                              | State and local |   |         | (10,464 | )        |   |                | 13,069   |   |   |         | 2,605   | 
|                              |                 |   |         |         |          |   |                |          |   |   |         |        
|                              |                 | $ | 402,805 |         |          | $ | (27,907        | )        |   | $ | 374,898 |        
|                              |                 |   |         |         |          |   |                |          |   |   |         |        
|Year ended December 31, 1999:
|                             
|                             
|                             
|                             
|                              | U.S. Federal    |   | $       | 82,184  |          |   | $              | 9,056    |   |   | $       | 91,240  | 
|                             
|                             
|                             
|                             
|                              | Foreign         |   |         | 53,067  |          |   |                | (4,264   | ) |   |         | 48,803  | 
|                             
|                             
|                             
|                             
|                              | State and local |   |         | 13,866  |          |   |                | 1,294    |   |   |         | 15,160  | 
|                              |                 |   |         |         |          |   |                |          |   |   |         |        
|                              |                 | $ | 149,117 |         |          | $ | 6,086          |          |   | $ | 155,203 |        
|                              |                 |   |         |         |          |   |                |          |   |   |         |        
|Year ended December 31, 1998:
|                             
|                             
|                             
|                             
|                              | U.S. Federal    |   | $       | 58,635  |          |   | $              | 13,528   |   |   | $       | 72,163  | 
|                             
|                             
|                             
|                             
|                              | Foreign         |   |         | 76,492  |          |   |                | 60,069   |   |   |         | 136,561 | 
|                             
|                             
|                             
|                             
|                              | State and local |   |         | 12,442  |          |   |                | 1,933    |   |   |         | 14,375  | 
|                              |                 |   |         |         |          |   |                |          |   |   |         |        
|                              |                 | $ | 147,569 |         |          | $ | 75,530         |          |   | $ | 223,099 |        
|                              |                 |   |         |         |          |   |                |          |   |   |         |        

F-39



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35% for 2000, 1999 and 1998
as a result of the following:

|                                                     |                                                           |   |         |         |      |   |                |         |   |   |         |        |  
|---------------------------------------------------- | --------------------------------------------------------- | - | ------- | ------- | ---- | - | -------------- | ------- | - | - | ------- | ------ | -
|                                                     |                                                           |   | 2000    |         | 1999 |   | 1998          
|                                                     |                                                           |   |         |         |      |   |               
|                                                     |                                                           |   |         |         |      |   | (in thousands)
|Computed expected tax expense                      |                                                           | $ | 192,173 |         |      | $ | 144,489        |         |   | $ | 177,324 |       
|                                                    
|                                                    
|                                                    
|                                                    
|Increase (reduction) in income taxes resulting from:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Nondeductible expenses for income tax purposes            |   |         | 9,232   |      |   |                | 12,904  |   |   |         | 9,676  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Tax gain in excess of book gain                           |   |         | 129,488 |      |   |                |        |   |   |         | 22,869 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | U.S. state and local income taxes, net
of federal benefit |   |         | 1,693   |      |   |                | 9,669   |   |   |         | 10,041 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Impact of taxation at different foreign rates             |   |         | 32,596  |      |   |                | 4,429   |   |   |         | 3,626  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dilution gain related to Hollinger L.P.                   |   |         |        |      |   |                | (29,327 | ) |   |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Minority interest earnings in Hollinger L.P.              |   |         | (17,359 | )    |   |                | (2,728  | ) |   |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                     |   |         | 27,075  |      |   |                | 15,767  |   |   |         | (437   | )
|                                                     |                                                           |   |         |         |      |   |                |         |   |   |         |       
|                                                     |                                                           | $ | 374,898 |         |      | $ | 155,203        |         |   | $ | 223,099 |       
|                                                     |                                                           |   |         |         |      |   |                |         |   |   |         |       

F-40



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities are presented below:

|                               |                                                                               |   |                |         |      |   |         |        | 
|------------------------------ | ----------------------------------------------------------------------------- | - | -------------- | ------- | ---- | - | ------- | ------ | 
|                               |                                                                               |   | 2000           |         | 1999
|                               |                                                                               |   |                |         |     
|                               |                                                                               |   | (in thousands)
|Deferred tax assets:          
|                              
|                              
|                              
|                              
|                               | Accounts receivable, principally due to allowance
for doubtful accounts       |   | $              | 475     |      |   | $       | 1,337  | 
|                              
|                              
|                              
|                              
|                               | Accrued expenses                                                              |   |                | 23,283  |      |   |         | 10,909 | 
|                              
|                              
|                              
|                              
|                               | Net operating loss carryforwards                                              |   |                | 37,863  |      |   |         | 33,071 | 
|                              
|                              
|                              
|                              
|                               | Other                                                                         |   |                | 12,049  |      |   |         |       | 
|                               |                                                                               |   |                |         |      |   |         |       
|Gross deferred tax assets      |                                                                               |   | 73,670         |         |      |   | 45,317  |       
|                              
|                              
|                              
|                              
|Less valuation allowance       |                                                                               |   | (6,411         | )       |      |   |        |       
|                               |                                                                               |   |                |         |      |   |         |       
|Net deferred tax assets        |                                                                               |   | 67,259         |         |      |   | 45,317  |       
|                               |                                                                               |   |                |         |      |   |         |       
|Deferred tax liabilities:     
|                              
|                              
|                              
|                              
|                               | Property, plant and equipment, principally due to
differences in depreciation |   |                | 18,861  |      |   |         | 57,253 | 
|                              
|                              
|                              
|                              
|                               | Intangible assets, principally due to differences in
basis and amortization   |   |                | 118,741 |      |   |         | 64,334 | 
|                              
|                              
|                              
|                              
|                               | Foreign exchange basis differences                                            |   |                | 11,299  |      |   |         | 8,664  | 
|                              
|                              
|                              
|                              
|                               | Long-term advances under printing contract                                    |   |                | 14,431  |      |   |         | 16,615 | 
|                              
|                              
|                              
|                              
|                               | Deferred gain on exchange of assets                                           |   |                | 45,520  |      |   |         | 24,187 | 
|                              
|                              
|                              
|                              
|                               | Unremitted earnings of a foreign equity investment                            |   |                | 44,253  |      |   |         | 47,878 | 
|                              
|                              
|                              
|                              
|                               | Other                                                                         |   |                |        |      |   |         | 40,139 | 
|                               |                                                                               |   |                |         |      |   |         |       
|Gross deferred tax liabilities |                                                                               |   | 253,105        |         |      |   | 259,070 |       
|                               |                                                                               |   |                |         |      |   |         |       
|Net deferred taxes             |                                                                               | $ | 185,846        |         |      | $ | 213,753 |       
|                               |                                                                               |   |                |         |      |   |         |       

At December 31, 2000, the Company had approximately $71,400,000 of
Canadian net operating loss carryforwards which will expire in varying
amounts through December 31, 2007.

Total income taxes paid in 2000, 1999 and 1998 amounted to $46,584,000,
$158,618,000 and $160,182,000, respectively.

F-41



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(19) Employee Benefit Plans

Defined Contribution Plans

The Company sponsors six domestic defined contribution plans, three of
which have provisions for Company contributions. For the years ended
December 31, 2000, 1999 and 1998, the Company contributed $1,558,000,
$1,722,000 and $501,000, respectively. The Company sponsors twelve
defined contribution plans in Canada and contributed $2,016,000 and
$2,524,000 to the plans in 2000 and 1999, respectively.

The Telegraph sponsors a defined contribution plan, The Telegraph Staff
Pension Plan, for the majority of its employees, as well as a defined
contribution plan to provide pension benefits for senior executives. In
both 2000 and 1999, contributions to the defined contribution plan are
included as part of the service cost of the defined benefit plan.
Contributions to each of the plans were as follows:

|                                       |  |                |     |      |  |      |     |  |  |  |       | 
|-------------------------------------- |  | -------------- | --- | ---- |  | ---- | --- |  |  |  | ----- | 
|                                       |  | 2000           |     | 1999 |  | 1998
|                                       |  |                |     |      |  |     
|                                       |  | (in thousands)
|The Telegraph Staff Pension Plan       |  | $              |    |      |  |      |    |  |  |  | 6,120 | 
|                                      
|                                      
|                                      
|                                      
|The Telegraph Executive Pension Scheme |  | $              | 585 |      |  |      | 514 |  |  |  | 550   | 
|                                       |  |                |     |      |  |      |     |  |  |  |       | 

The Telegraph plans assets consist principally of U.K. and overseas
equities, unit trusts and bonds.

Defined Benefit Plans

The Company and subsidiaries have seven domestic and seven foreign
single-employer defined benefit plans and contribute to various
union-sponsored, collectively bargained domestic multi-employer pension
plans. The Companys contributions to these plans for the years ended
December 31, 2000, 1999 and 1998 were:

|                      |  |      |        |      |  |                |        |  |  |  |       | 
|--------------------- |  | ---- | ------ | ---- |  | -------------- | ------ |  |  |  | ----- | 
|                      |  | 2000 |        | 1999 |  | 1998          
|                      |  |      |        |      |  |               
|                      |  |      |        |      |  | (in thousands)
|Single-employer plans |  | $    | 11,540 |      |  |                | 14,954 |  |  |  | 9,263 | 
|                     
|                     
|                     
|                     
|Multi-employer plans  |  | $    | 6,127  |      |  |                | 6,888  |  |  |  | 4,959 | 
|                      |  |      |        |      |  |                |        |  |  |  |       | 

F-42



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The Telegraph has a defined benefit plan that was closed on July 1,
1991 and provides only benefits accrued up to that date. The liabilities
of the plan have been actuarially valued as at December 31, 2000. At that
date the market value of the plan assets was $141,387,000, representing
97% of the estimated cost of purchasing the plans benefits from an
insurance company. The actuary assumed a discount rate of 6%. Increases
to pension payments are discretionary and are awarded by the trustees,
with the Telegraphs consent, from surpluses arising in the fund from time
to time. Contributions to the trust were $6,670,000 and $6,469,000 for
2000 and 1999, respectively. There were no contributions made in 1998.

Pursuant to the West Ferry joint venture agreement, the Telegraph has
a commitment to fund 50% of the obligation under West Ferrys defined
benefit plan.

Single-Employer Pension Plans

The benefits under the subsidiary companies single-employer pension
plans are based primarily on years of service and compensation levels.
The Company funds the annual provision deductible for income tax purposes.
The plans assets consist principally of marketable equity securities and
corporate and government debt securities.

F-43



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The components of net period benefit cost for the years ended
December 31, 2000, 1999 and 1998 are as follows:

|                                                              |  |      |         |      |  |                |         |   |  |   |         |  
|------------------------------------------------------------- |  | ---- | ------- | ---- |  | -------------- | ------- | - |  | - | ------- | -
|                                                              |  | 2000 |         | 1999 |  | 1998          
|                                                              |  |      |         |      |  |               
|                                                              |  |      |         |      |  | (in thousands)
|Service cost                                                  |  | $    | 12,376  |      |  | $              | 15,552  |   |  | $ | 9,064   |  
|                                                             
|                                                             
|                                                             
|                                                             
|Interest cost                                                 |  |      | 37,774  |      |  |                | 35,938  |   |  |   | 30,372  |  
|                                                             
|                                                             
|                                                             
|                                                             
|Expected return on plan assets                                |  |      | (52,771 | )    |  |                | (49,659 | ) |  |   | (43,615 | )
|                                                             
|                                                             
|                                                             
|                                                             
|Amortization of (gains) losses                                |  |      | (200    | )    |  |                |        |   |  |   |        |  
|                                                             
|                                                             
|                                                             
|                                                             
|Settlement (gain) loss                                        |  |      | 4,262   |      |  |                |        |   |  |   |        |  
|                                                             
|                                                             
|                                                             
|                                                             
|Amortization of prior service costs                           |  |      | 521     |      |  |                | 564     |   |  |   | 859     |  
|                                                             
|                                                             
|                                                             
|                                                             
|Valuation allowance provided against
prepaid benefit
    cost |  |      | 63,910  |      |  |                |        |   |  |   |        |  
|                                                              |  |      |         |      |  |                |         |   |  |   |         |  
|Net periodic (benefit) cost                                   |  | $    | 65,872  |      |  | $              | 2,395   |   |  | $ | (3,320  | )
|                                                              |  |      |         |      |  |                |         |   |  |   |         |  

The table below sets forth the reconciliation of the benefit obligation as of December 31, 2000 and
1999:

|                                                |  |                |         |      |  |   |         |  
|----------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                                |  | 2000           |         | 1999
|                                                |  |                |         |     
|                                                |  | (in thousands)
|Benefit obligation at the beginning of the year |  | $              | 591,180 |      |  | $ | 490,946 |  
|                                               
|                                               
|                                               
|                                               
|Adjustment to opening balance                   |  |                | 3,130   |      |  |   | 116,339 |  
|                                               
|                                               
|                                               
|                                               
|Service cost                                    |  |                | 12,376  |      |  |   | 15,552  |  
|                                               
|                                               
|                                               
|                                               
|Interest cost                                   |  |                | 37,774  |      |  |   | 35,938  |  
|                                               
|                                               
|                                               
|                                               
|Participant contributions                       |  |                | 7,206   |      |  |   | 7,809   |  
|                                               
|                                               
|                                               
|                                               
|Divestitures                                    |  |                | (96,738 | )    |  |   |        |  
|                                               
|                                               
|                                               
|                                               
|Plan amendments                                 |  |                | 1,605   |      |  |   |        |  
|                                               
|                                               
|                                               
|                                               
|Settlement (gain) loss                          |  |                | (529    | )    |  |   |        |  
|                                               
|                                               
|                                               
|                                               
|Exchange rate differences                       |  |                | (29,066 | )    |  |   | 17,994  |  
|                                               
|                                               
|                                               
|                                               
|Curtailment (gain) loss                         |  |                | (16     | )    |  |   | (2,465  | )
|                                               
|                                               
|                                               
|                                               
|Changes in assumptions                          |  |                |        |      |  |   | (50,151 | )
|                                               
|                                               
|                                               
|                                               
|Actuarial (gain) loss                           |  |                | (2,346  | )    |  |   | (2,855  | )
|                                               
|                                               
|                                               
|                                               
|Benefits paid                                   |  |                | (36,860 | )    |  |   | (37,927 | )
|                                                |  |                |         |      |  |   |         |  
|Benefit obligation at the end of the year       |  | $              | 487,716 |      |  | $ | 591,180 |  
|                                                |  |                |         |      |  |   |         |  

The 2000 curtailment and settlement gains were related to the sale of
Canadian and Community Group newspapers. In 1999, the curtailment
resulted from the sale of certain Community Group newspapers.

F-44



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The table below sets forth the change in plan assets for the years ended
December 31, 2000 and 1999:

|                                                       |  |   |                |   |      |   |         |   | 
|------------------------------------------------------ |  | - | -------------- | - | ---- | - | ------- | - | 
|                                                       |  |   | 2000           |   | 1999
|                                                       |  |   |                |   |     
|                                                       |  |   | (in thousands)
|Fair value of plan assets at the beginning of the year |  | $ | 684,417        |   |      | $ | 504,721 |  
|                                                      
|                                                      
|                                                      
|                                                      
|Adjustment to opening balance                          |  |   | 121            |   |      |   | 103,326 |  
|                                                      
|                                                      
|                                                      
|                                                      
|Actual return on plan assets                           |  |   | 20,092         |   |      |   | 77,707  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Change in assumption                                   |  |   |               |   |      |   | (10,044 | )
|                                                      
|                                                      
|                                                      
|                                                      
|Exchange rate differences                              |  |   | (30,716        | ) |      |   | 23,543  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Employer contributions                                 |  |   | 11,540         |   |      |   | 14,969  |  
|                                                      
|                                                      
|                                                      
|                                                      
|Participant contributions                              |  |   | 7,206          |   |      |   | 8,122   |  
|                                                      
|                                                      
|                                                      
|                                                      
|Settlement (gain) loss                                 |  |   | (529           | ) |      |   |        |  
|                                                      
|                                                      
|                                                      
|                                                      
|Divestitures                                           |  |   | (100,676       | ) |      |   |        |  
|                                                      
|                                                      
|                                                      
|                                                      
|Benefits paid                                          |  |   | (36,860        | ) |      |   | (37,927 | )
|                                                       |  |   |                |   |      |   |         |  
|Fair value of plan assets at the end of the year       |  | $ | 554,595        |   |      | $ | 684,417 |  
|                                                       |  |   |                |   |      |   |         |  

|                                                           |                                 |   |                         |         |      |   |        |         |  
|---------------------------------------------------------- | ------------------------------- | - | ----------------------- | ------- | ---- | - | ------ | ------- | -
|                                                           |                                 |   | Year ended December 31, |        
|                                                           |                                 |   |                         |        
|                                                           |                                 |   | 2000                    |         | 1999
|                                                           |                                 |   |                         |         |     
|                                                           |                                 |   | (in thousands)         
|                                                           | Funded status                   |   | $                       | 66,879  |      |   | $      | 93,237  |  
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Unrecognized net actuarial loss |   |                         | 3,732   |      |   |        | (28,366 | )
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Unrecognized prior service cost |   |                         | 3,663   |      |   |        | 2,776   |  
|                                                           |                                 |   |                         |         |      |   |        |        
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Prepaid (accrued) benefit cost  |   |                         | 74,274  |      |   |        | 67,647  |  
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Valuation allowance             |   |                         | (65,302 | )    |   |        |        |  
|                                                           |                                 |   |                         |         |      |   |        |        
|Prepaid (accrued) benefit cost, net of valuation allowance |                                 | $ | 8,972                   |         |      | $ | 67,647 |        
|                                                           |                                 |   |                         |         |      |   |        |        

F-45



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The following table provides the amounts recognized in the balance sheet as at the end of each year:

|                                       |  |                         |         |      |  |   |         |  
|-------------------------------------- |  | ----------------------- | ------- | ---- |  | - | ------- | -
|                                       |  | Year ended December 31,
|                                       |  |                        
|                                       |  | 2000                    |         | 1999
|                                       |  |                         |         |     
|                                       |  | (in thousands)         
|Prepaid benefit cost                   |  | $                       | 21,130  |      |  | $ | 84,540  |  
|                                      
|                                      
|                                      
|                                      
|Accrued benefit liability              |  |                         | (14,547 | )    |  |   | (16,893 | )
|                                      
|                                      
|                                      
|                                      
|Intangible asset                       |  |                         | 299     |      |  |   |        |  
|                                      
|                                      
|                                      
|                                      
|Accumulated other comprehensive income |  |                         | 2,090   |      |  |   |        |  
|                                       |  |                         |         |      |  |   |         |  
|                                       |  | $                       | 8,972   |      |  | $ | 67,647  |  
|                                       |  |                         |         |      |  |   |         |  

The ranges of assumptions were as follows:

|                               |  |      |            |      |  |      |              |   |  |  |            |  
|------------------------------ |  | ---- | ---------- | ---- |  | ---- | ------------ | - |  |  | ---------- | -
|                               |  | 2000 |            | 1999 |  | 1998
|                               |  |      |            |      |  |     
|Discount rate                  |  |      | 6.0% - 8.0 | %    |  |      | 6.0% -   8.0 | % |  |  | 7.0% - 7.5 | %
|                              
|                              
|                              
|                              
|Expected return on plan assets |  |      | 6.0% - 9.0 | %    |  |      | 7.0% - 10.0  | % |  |  | 7.0% - 9.0 | %
|                              
|                              
|                              
|                              
|Compensation increase          |  |      | 3.5% - 4.0 | %    |  |      | 3.0% -   4.0 | % |  |  | 3.0% - 4.0 | %

Multi-employer Pension Plans

Certain U.S. employees are covered by union-sponsored multi-employer
pension plans, all of which are defined benefit plans. Contributions are
determined in accordance with the provisions of negotiated labor contracts
and are generally based on the number of man hours worked. Pension
expense for these plans was $1,201,000, $2,402,000 and $2,325,000 for the
years ended December 31, 2000, 1999 and 1998, respectively. The passage
of the Multi-employer Pension Plan Amendments Act of 1980 (the Act) may,
under certain circumstances, cause the Company to become subject to
liabilities in excess of the amounts provided for in the collective
bargaining agreements. Generally, liabilities are contingent upon
withdrawal or partial withdrawal from the plans. The Company has not
undertaken to withdraw or partially withdraw from any of the plans as of
December 31, 2000. Under the Act, withdrawal liabilities would be based
upon the Companys proportional share of each plans unfunded vested
benefits. As of the date of the latest actuarial valuations, the
Companys share of the unfunded vested liabilities of each plan was zero.

F-46



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

Post Retirement Benefits

The Company sponsors two foreign defined post retirement plans that
provide post retirement benefits to certain employees. The benefits are
accrued in accordance with Statement of Financial Accounting Standards No.
112 Employers Accounting for Postemployment Benefits.

The components of net period post retirement benefit cost for the years
ended December 31, 2000 and December 31, 1999 are as follows:

|                                          |  |                |         |      |  |   |        |  
|----------------------------------------- |  | -------------- | ------- | ---- |  | - | ------ | -
|                                          |  | 2000           |         | 1999
|                                          |  |                |         |     
|                                          |  | (in thousands)
|Service cost                              |  | $              | 671     |      |  | $ | 895    |  
|                                         
|                                         
|                                         
|                                         
|Interest cost                             |  |                | 2,657   |      |  |   | 2,600  |  
|                                         
|                                         
|                                         
|                                         
|Amortization of losses (gains)            |  |                | (131    | )    |  |   |       |  
|                                         
|                                         
|                                         
|                                         
|Settlement/curtailment                    |  |                | (11,992 | )    |  |   | (1,549 | )
|                                          |  |                |         |      |  |   |        |  
|Net periodic post retirement benefit cost |  | $              | (8,795  | )    |  | $ | 1,946  |  
|                                          |  |                |         |      |  |   |        |  

The table below sets forth the reconciliation of the accumulated post retirement benefit
obligation as of December 31, 2000 and 1999:

|                                                                            |  |                |         |      |  |   |        |  
|--------------------------------------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------ | -
|                                                                            |  | 2000           |         | 1999
|                                                                            |  |                |         |     
|                                                                            |  | (in thousands)
|Accumulated post retirement benefit obligation
at the beginning of the year |  | $              | 39,349  |      |  | $ | 37,987 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Adjustment to opening balance                                               |  |                |        |      |  |   | 3,339  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Service cost                                                                |  |                | 671     |      |  |   | 895    |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Interest cost                                                               |  |                | 2,657   |      |  |   | 2,600  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Actuarial (gains) and losses                                                |  |                | 12,544  |      |  |   | (4,338 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Divestitures                                                                |  |                | (17,694 | )    |  |   |       |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Benefits paid                                                               |  |                | (1,388  | )    |  |   | (1,425 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Other, including exchange rate differences                                  |  |                | (1,545  | )    |  |   | 291    |  
|                                                                            |  |                |         |      |  |   |        |  
|Accumulated post retirement benefit obligation
at the end of the year       |  | $              | 34,594  |      |  | $ | 39,349 |  
|                                                                            |  |                |         |      |  |   |        |  

F-47



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

The table below sets forth the plans funded status reconciled to the amounts recognized
in the Companys financial statements:

|                                     |  |                |         |      |  |   |         |  
|------------------------------------ |  | -------------- | ------- | ---- |  | - | ------- | -
|                                     |  | 2000           |         | 1999
|                                     |  |                |         |     
|                                     |  | (in thousands)
|Unfunded status                      |  | $              | (34,594 | )    |  | $ | (39,349 | )
|                                    
|                                    
|                                    
|                                    
|Unrecognized net gain (loss)         |  |                | 667     |      |  |   | (6,611  | )
|                                     |  |                |         |      |  |   |         |  
|Accrued post retirement benefit cost |  | $              | (33,927 | )    |  | $ | (45,960 | )
|                                     |  |                |         |      |  |   |         |  

The weighted average discount rate used in determining the accumulated
post retirement benefit obligation was 6.75% and 7.25% for 2000 and 1999,
respectively. All benefits under the plan are paid for by the Companys
contribution to the Plan. For measuring the expected post retirement
benefit obligation, a 10% annual rate of increase in the per capita claims
was assumed for 2000 and an 8% annual rate of increase in the per capita
claims was assumed for 1999. The 2000 rate was assumed to decrease to 5%
in 2005 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. If the health care cost trend
rate were increased 1%, the accumulated post retirement benefit obligation
as of December 31, 2000 would have increased $2,512,000 and the effect of
this change on the aggregate of service and interest cost for 2000 would
have been an increase of $299,000. If the health care cost trend rate
were decreased 1%, the accumulated post retirement benefit obligation as
of December 31, 2000 would have decreased by $2,249,000 and the effect of
this change on the aggregate of service and interest cost for 2000 would
have been a decrease of $263,000.

F-48



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

(20) Summarized Financial Information

Summarized balance sheet and income statement data for Hollinger
International Publishing Inc. is as follows:

|                       |                      |  |                |           |      |  |      |           |  |  |   |           | 
|---------------------- | -------------------- |  | -------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                       |                      |  | 2000           |           | 1999 |  | 1998
|                       |                      |  |                |           |      |  |     
|                       |                      |  | (in thousands)
|Balance Sheet Data:   
|                      
|                      
|                      
|                      
|                       | Current assets       |  | $              | 443,128   |      |  | $    | 417,439   |  |  | $ | 73,596    | 
|                      
|                      
|                      
|                      
|                       | Total assets         |  |                | 2,630,061 |      |  |      | 3,500,523 |  |  |   | 2,823,034 | 
|                      
|                      
|                      
|                      
|                       | Current liabilities  |  |                | 649,889   |      |  |      | 720,935   |  |  |   | 503,027   | 
|                      
|                      
|                      
|                      
|                       | Total liabilities    |  |                | 1,684,572 |      |  |      | 2,607,680 |  |  |   | 2,186,654 | 
|                      
|                      
|                      
|                      
|                       | Minority interest    |  |                | 89,228    |      |  |      | 155,901   |  |  |   | 107,002   | 
|                      
|                      
|                      
|                      
|                       | Stockholders equity |  |                | 856,261   |      |  |      | 736,942   |  |  |   | 529,378   | 
|                      
|                      
|                      
|                      
|Income Statement Data:
|                      
|                      
|                      
|                      
|                       | Operating revenues   |  |                | 2,096,019 |      |  |      | 2,147,402 |  |  |   | 2,197,760 | 
|                      
|                      
|                      
|                      
|                       | Operating income     |  |                | 227,596   |      |  |      | 215,549   |  |  |   | 285,268   | 
|                      
|                      
|                      
|                      
|                       | Net earnings         |  |                | 146,537   |      |  |      | 213,675   |  |  |   | 244,057   | 
|                       |                      |  |                |           |      |  |      |           |  |  |   |          

(21) Quarterly Financial Data (Unaudited)

Quarterly financial data for the years ended December 31, 2000 and 1999
are as follows:

|                                  |  |                                       |         |         |  |         |         |         |  |  |         |   |  |  |         | 
|--------------------------------- |  | ------------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  |  | ------- | - |  |  | ------- | 
|                                  |  | 2000                                 
|                                  |  |                                      
|                                  |  | First                                 |         | Second  |  | Third   |         | Fourth 
|                                  |  | quarter                               |         | quarter |  | quarter |         | quarter
|                                  |  |                                       |         |         |  |         |         |        
|                                  |  | (in thousands, except per share data)
|Total operating revenues          |  | $                                     | 549,224 |         |  |         | 574,115 |         |  |  | 517,474 |   |  |  | 455,206 | 
|                                 
|                                 
|                                 
|                                 
|Total operating income            |  | $                                     | 61,276  |         |  |         | 71,749  |         |  |  | 35,018  |   |  |  | 53,705  | 
|                                 
|                                 
|                                 
|                                 
|Net earnings (loss)               |  | $                                     | 28,151  |         |  |         | 4,736   |         |  |  | (3,921  | ) |  |  | 88,109  | 
|                                 
|                                 
|                                 
|                                 
|Basic earnings (loss) per share   |  | $                                     | 0.26    |         |  |         | 0.03    |         |  |  | (0.06   | ) |  |  | 0.87    | 
|                                 
|                                 
|                                 
|                                 
|Diluted earnings (loss) per share |  | $                                     | 0.25    |         |  |         | 0.02    |         |  |  | (0.06   | ) |  |  | 0.80    | 
|                                  |  |                                       |         |         |  |         |         |         |  |  |         |   |  |  |         | 

F-49



---



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued

|                                  |  |                                       |         |         |  |         |         |         |  |  |         |   |  |  |         | 
|--------------------------------- |  | ------------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  |  | ------- | - |  |  | ------- | 
|                                  |  | 1999                                 
|                                  |  |                                      
|                                  |  | First                                 |         | Second  |  | Third   |         | Fourth 
|                                  |  | quarter                               |         | quarter |  | quarter |         | quarter
|                                  |  |                                       |         |         |  |         |         |        
|                                  |  | (in thousands, except per share data)
|Total operating revenues          |  | $                                     | 524,702 |         |  |         | 546,390 |         |  |  | 499,215 |   |  |  | 577,095 | 
|                                 
|                                 
|                                 
|                                 
|Total operating income            |  | $                                     | 58,275  |         |  |         | 67,073  |         |  |  | 17,972  |   |  |  | 69,482  | 
|                                 
|                                 
|                                 
|                                 
|Net earnings                      |  | $                                     | 147,167 |         |  |         | 91,047  |         |  |  | 86      |   |  |  | 7,052   | 
|                                 
|                                 
|                                 
|                                 
|Basic earnings (loss) per share   |  | $                                     | 1.35    |         |  |         | 0.91    |         |  |  | (0.02   | ) |  |  | 0.05    | 
|                                 
|                                 
|                                 
|                                 
|Diluted earnings (loss) per share |  | $                                     | 1.20    |         |  |         | 0.81    |         |  |  | (0.02   | ) |  |  | 0.04    | 
|                                  |  |                                       |         |         |  |         |         |         |  |  |         |   |  |  |         | 

(22) Subsequent Event (Unaudited)

In November 2000, Hollinger L.P. announced the sale of UniMédia Company to
Gesca Limited, a subsidiary of Power Corporation of Canada. The sale
closed effective January 2001. The publications sold represent
the French-
language newspapers of Hollinger L.P., including three paid circulation
dailies and 15 weeklies published in Quebec and Ontario. The resulting
gain will be recorded in 2001.

F-50